5 Key Metrics for Middle Market Companies

[MUSIC] Welcome to the Dashboard Effect podcast, I'm Brick Thompson. >> I'm Kate, I really. >> Kate, thanks for joining me from Sales Land here at Blue Margin. I wanted to talk to you this morning about five key metrics that people might want to focus on, as they're starting to think about doing BI and trying to figure out where they could get the most value. You talk to our prospects and clients all the time, so I thought it'd be great to get your perspective here. I'll start us off and then we sort of had some talk before, the recording about what sales metrics you care about. I wanted to delve into those, but also just other ones that people focus on. >> Awesome. >> All right. One that I see commonly in that me is the CEO of Blue Margin, I care about is a cash conversion. Some people call it call to cash. How long does it take you from the time that you have initiated a sale to a customer to actually get the cash? It's something that we look at. On charts, we know how many days it takes, first of all, from the time we get an MQL to the time we close to the time that we've actually engaged with the customer, done work, or able to invoice and how long it takes to collect. That's something that is really important to managing cash in the business. I think it's something that a lot of businesses do track or maybe calculate every now and then to see how it's going. But if you track it all the time and see the trends, it's something that you can do something about immediately. Especially if you've built a good dashboard that doesn't just have the final result a number of days from call to cash, but has some of the approximate things that contribute to how long it takes to get there. All those things I just listed. That would be one that would be high on my list. What's one that you hear about a lot? Yeah. I mean, I think actually what you just shared there is so critical because that can be quite challenging to track. You need data from your CRM, you need data from your ERP, your operational systems, and potentially payroll, really getting a whole view of company health. I think that's a great place to start. Would give anybody a clear vision of how are we performing as a business? I'm in sales. It's no surprise that a lot of what my client spring is a just acute focus on top line. Yeah. How is our revenue performing? What are we looking from a bookings perspective out into the future? So not just what are we actually invoicing people, but what's in our backlog to deliver and be able to invoice? Exactly. So really just honing in on, okay, what does our pipeline look like? Do we have enough coverage to hit our revenue targets for the year? How quickly are we actually converting that pipeline through to bookings? And then how effectively are we actually executing and delivering on those bookings? So you could tackle 20 metrics in that topic. I mean, as you were listing that, I thought of several. So yeah, you could be tracking marketing qualified leads, conversion to a sales qualified lead. What percentage of those happen? How long does that usually take? You just mentioned how long does it take to close a sale? How many days on average? And what's the trend? Is it getting longer? Is it getting shorter? What do we think the reasons are for that? What percent of SQL's sales qualified leads are we closing? How long does it take us to disqualify a sale? I mean, it could be tempting, especially if businesses slow to hang on to deals that aren't great for too long instead of shedding it and moving on to one that might be better or something like that. There's probably others I'm not thinking of. Yeah, I think one of the, you're certainly the executive level metrics that we even track here is just your customer acquisition cost against the lifetime value of a customer. So who are you bringing on? Are they consistently smaller deals? Are they getting you more towards that ideal state of profitability per client? So that's another area that just blends a number of different components of the business. Okay, so I said there would be five. We've covered 15 already. But if we group those, one would be sort of the cash conversion cycle two is various metrics having to do with your sales pipeline. Three is actual cost of sales versus customer acquisition cost versus lifetime value. Maybe a fourth one, really common one that's valuable is employee productivity metrics. There's a lot that goes into this, but a very common one might be a utilization number. So if you have, for example, let's say you've got repair technicians in the field, you want to as much as you can have their time that they're on the clock being spent generating revenue actually working on customer repairs. And so if you can watch that and figure out what are the things that are contributing to low utilization and improve that? I mean, you can improve gross margins dramatically. We've seen that a lot in our clients. It makes a ton of sense to track that in a services business in particular. Of course, that's the primary revenue generating lever. We also see that employee productivity number be really important in the manufacturing space. So when you're looking at product, obviously labor is such a key input. Oftentimes, you're more physically constrained because you have an actual plant in a certain geography. So keeping an eye on utilization, not just from are we delivering the hours we planned, but making sure we aren't overtaxing certain components of our workforce. Because that leads to attrition, harder to backfill, etc. That's a really good point. You see that in engineering firms where they're targeting 75% utilization, but they're actually running 90%. It's good to know that, to know if you're just running too hot and you're risking turnover losing resources or having people produce optimal work, that type of thing. You mentioned factories. There's also utilization of factory equipment. So not just people. I mean, how many hours is this expensive machine that we bought that we're paying alone on or just has a capital cost? How effective are we using it? Could we use it more? I mean, if we're only getting three hours a day of use out of it, could we somehow figure out how to get 12 or 18 or 24? Do we really need to buy another machine? Or are we running our three machines at 24/7? And yes, we would do better to get more machines. We would have more throughput for our backlog. When we also see particularly in the middle market for those manufacturers, they're growing quickly. Maybe they have multiple plants. They're acquiring companies quickly. It's not just machines at one location. It's how effectively are we distributing demand across those plants and where are bottlenecks? So you can continue to obviously peel back the onion on any one of these, but actors came to mind for product productivity in particular. That's good. So then, all right, I'm going to count that as third, no, fourth metric. Fifth metric then is just gross margin. I think especially utilization of machinery and factories and warehouses and so on, but also employee workforce, so important to affecting your gross margin. If you're at a services business, most of your cost may actually be employee cost and so having better utilization can make a big difference there, but certainly there's analogous things in almost every business. And tracking that gross margin, in particular, not sort of getting an end of month total or an end of quarter total, but seeing how it's changing over time can allow you to go and find problems and make corrections quickly. Well, certainly at the highest level, just seeing that top level trend is important, but of course, again, getting down into the deeper level, you can start to look at your GM by particular product, GM by certain services that you're offering. It seems like at any point in the last five years, we've gone through these periods of intense uncertainty. We're in one of those right now. And that ability to manage costs effectively and get that level of detail is just critical. It's true. And in fact, you can do all those breakdowns by client as well. And really, sometimes you'll realize you have a client you're actually not making very much money on. And another one that you're doing very well with it, you want to make sure you give them extra attention and make sure that they are getting maximal value out of your product or services. Okay. Any, that's five. The others that you want to add. You know, I think we we covered a lot of it. What really stands out to me is that each one of these areas is so critical to contextualize performance across the business. So certainly understanding revenue is key. But if you're not also looking at gross margin, you're missing a key component of your success and really what your year is going to look like. That's where we see a lot of our clients want to start with an executive level scorecard where they can really track all of these in context together with trends is something like that. You're driving the F1 equivalent. You have a dashboard that really allows you to just you continue to cruise. I love that. Yeah, everything we talked about in a relates and if you're doing a good job with your BI should be that way largely. Okay, great. Well, thanks for joining me. I appreciate it. Yeah, thanks for having me. All right.