Friday, June 09, 2017

It's All About the Metrics

 "Without data, you are just another person with an opinion. " 
~ W. Edwards Deming 

While it's fine to have an opinion & keen insight.…owners are expected to share more when their business is For Sale.  After all, it’s the numbers that tell the story that prospective buyers want to hear.

Thanks to technology, there are numerous tools to measure metrics and neatly populate data into worksheets, scorecards or dashboards. While the data may visually look good, is it helping you run a business that will impress buyers down the road?

Not all metrics are created equal; Nor does one-size-fit all...
Some performance metrics are meaningful across industries, e.g.: revenue, EBITDA, customer mix, etc.  Others are not. Choosing the right metrics for your business is key.  The most useful ones are simple to track, easy to understand and actionable. 

Whether you're preparing for a sale or not - Focus on business goals that are critical or need improvement.  Measure only what's important relative to your goals.  Avoid the trap of too much data and "Analysis Paralysis".

Relevant but Not Easy
Consider a common example of a metric...BMI.  The index devised by a European in the 1830's is familiar to many but seldom computed without a calculator or Fitbit.  The required conversion of weight (pounds to kilograms) and height (inches to meters) is just too cumbersome for most of us on this side of the Atlantic.     

Relevant, Easy, Actionable  
We work with many healthcare industry clients and have found a few specific metrics helpful in assessing ongoing performance.  If your business is healthcare-related, have you considered adding the following to your analysis...
  • Revenue* per FTE: This is a quick way to assess how much money your business generates per full-time employee.  Track it monthly and yearly - it's easy to do and will alert you to both good and bad trends.
  • Revenue* per revenue-generating employee: Most businesses have 2 types of employees - those providing billable services & those providing business support.  It's an easy to track metric that can signal the need to ramp up employee productivity.  
  • Payroll hours/visit:  Another productivity metric which involves hours of payroll paid in a pay period divided by total patients seen (same pay period).  In a practice not doing complex procedures, the result should range between 1.5 - 2 hours per visit.  (Include salaried and hourly staff in computation.)
*Cash collected 

Have a question about the right metrics for your business?  Don't hesitate to call us, we can help...610-527-8400.