Finance

5 Key Financial Metrics Small Businesses Need To Track

Over the span from 2000-2019 small businesses in America created over 10 million new jobs. As a small business owner, the number of people you employ and their payroll is only a few of the many key financial metrics to consider.

Financial analysis can help your business succeed and help you make critical business decisions. The competitive business world leaves no room for error and the quality of your metrics information can be the edge you need.

If you are wondering where to start when it comes to business metrics check out this nifty guide. Here we outline 5 key financial metrics that your business needs to track to stay successful.

1. Cash Flow

How much liquid capital does your business have? Where is it coming from and where is it going? These are the questions you need to ask when analyzing the business metrics of cash flow.

Liquid cash is different from other assets such as lines of credit. It is a direct result of profits or some other cash influx. It is one of the most valuable assets in the business world so know how much liquid capital your business has.

2. Key Financial Metrics for Your Employees

The key financial metrics that pertain to your employees are payroll, benefits, and retirement spending. You need to know how much each one of your employees costs your business to stay on top of your budget.

Knowing your employee pay metrics will help you make key decisions when hiring or firing new employees. Employee retirement metrics are particularly important. Retirement expenses can add up long after an employee has left

3. Net Profit

Net profit is one of the most basic and important metrics to analyze for your business. Net profit is the total amount of profit your business earns after deducting all of the expenses it requires to operate.

You can determine net profit through your profit management accounting strategy. Use some foundational bookkeeping skills to determine net profit. You can learn more about those here.

4. Cost Per Unit

If you can determine the cost per unit of the goods or services your business provides you can use this data to optimize your production strategies. You want to make sure that your prices are competitive, but also profitable.

By determining how much it costs you to produce something you can figure out the appropriate mark-up for selling to customers. You can then determine how many units to make to turn a profit.

5. Projected Growth

The projected growth of your business and its profits are crucial metrics to analyze. You cannot plan an adequate path forward for your business without having some sort of idea of how much it is projected to grow.

Try taking into account some past data to see how your business has grown up until this point. This can be an excellent baseline for the kind of growth you can expect to see in the future.

Small Business Metrics Help You Succeed

Small business metrics are your eyes and ears when it comes to determining the best direction to take your organization. Without them, your business will be drifting listlessly along in the sea of business without any direction.

When determining how to best analyze your business, make sure to take into account the five key financial metrics listed in this guide. To stay on top of other vital information about the business world check out our site!

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