Why you should master the metrics of business
Posted Wednesday, December 11 2013 at 13:37
Last week, we looked at the business performance measures that every business must track. This week we discuss the importance of knowing the additional metrics that your specific industry considers to be of value. The dynamics within each industry vary, as do the factors considered important for success. Space limitations restrict us to just two examples but the hope is that by reading them, you will be inspired to find out the important metrics in your industry, if you do not know them already.
If you own a retail shop, some key metrics include knowing (for a specific period of time like a day, week or month) how many people actually walk into your shop, the number and percentage who walk out with a purchase, the average value of their purchases and the number and percentage of people who walk out empty-handed. This provides useful planning and sales projection information. If you find out that only 15 per cent of the people who walk in end up leaving with a purchase and 85 per cent leave empty handed, there is something that puts off potential customers. Are there some basic essentials missing from your shelves that you should begin carrying?
The metrics you track will uncover both areas where improvement is needed as well as areas where the business is doing an excellent job.
In the hotel business, two key metrics within a specified period of time like a week, month or year are the occupancy rate (number of paid-for, occupied rooms divided by the number of available rooms); and the revenue per available room (total room revenue divided by the total rooms available).
Find out the reasons beyond your occupancy rates and revenue per room rates irrespective of whether the rates are high or low. With high rates, find out what is being done right and stick to it. With low rates, find out what is not being done right and if possible, fix it.
Realising that their occupancy rates were low, several Kampala hotels turned to hosting seminars and other events to increase the hotel’s revenue generating capacity.
Such decisions to diversify revenue sources usually result from knowledge about key industry performance metrics and one’s company performance against them.
Finally, either you or your designate can also find a wealth of information on industry performance measures/metrics by searching online.