In any business, measuring what you do is essential to understanding whether you are making progress and improving your bottom line. When it comes to scaling an accounting business, this is even more critical. By tracking the right metrics, you can manage your growth and make sure that each step you take leads in the right direction.
The first metric that you should be tracking is your revenue. This seems obvious, but it is important to track both your overall revenue against last year’s revenue and against your budget.
Another important metric to track is the Cost of Goods Sold to be below 40% and if you can control it to under 40% than your EBITDA will look after itself at above 25% (after Partners’ salary)
The third metric is lock-up days because without cashflow, your business will be in trouble. Lock-up days are Debtors and WIP which should be below 20 days.
The fourth metric should be the number of new clients that you are bringing on each month less the number of clients lost. Naturally, the Net figure should be increasing
The fifth and final metric is how happy your clients are and how happy your staff are. These are done by surveys and called Net Promotor Scores (NPS). An NPS of 9 or 10 out of 10 will mean your clients will go out of their way to refer you to new clients.
An NPS of 7 or 8 will mean they are happy, but they will not go out of their way to refer you to a friend. An NPS of 4 or 5 means they will leave as soon as someone approaches them and finally an NPS score of below 3 means they will go out of their way to badmouth your business.
Additionally, it’s clear that staff do not leave the company, but they leave their managers so it’s important that surveys are done periodically to ensure that staff concerns reach the right people and problems are identified and addressed before you receive a resignation letter
These 5 KPI’s are referred to as the Fab 5 and if all are trending upwards, you know you have a healthy business.