Business Efficiency: Measure Dollars In and Dollars Out - dummies

Business Efficiency: Measure Dollars In and Dollars Out

By Marina Martin

Increasing income while decreasing expenses is what people usually think of when they hear “business efficiency,” although it’s never quite that simple. When you’re measuring financial milestones, always keep in mind the non-obvious and long-term costs such as employee time and warranty-related expenses. Ask yourself these questions:

  • How much are you spending in employee salaries? How does this break down across department, skill level, and seniority?

  • How much are you paying in taxes? How much, in terms of time and expense, are you paying to prepare your taxes?

  • How much does it cost to hire one new employee, from marketing the open position to completing training?

  • What is your monthly infrastructure overhead? Include mortgage interest, property taxes, utilities, and landscaping for each building, and gas/maintenance for company cars.

  • How much do you spend on shipping? Include direct mail costs, envelopes, and shipping materials in addition to employee time spent preparing and delivering packages.

  • How much does it cost to produce one unit? This one’s tricky, and most businesses can never get a 100 percent accurate figure, but try your best. Start with the resources needed to earn one sale and go on through manufacturing, delivering, and supporting that sale.

  • What’s your revenue per customer? How about per customer referral? What’s the average single order amount compared to the average lifetime order amount?

  • What percent of revenue comes from each sales leg of your business? For example, is the majority of your profit in selling a product, accessories, or support?

  • How much does it cost to resolve a customer complaint?

  • What are your sales per employee? Per department? Per product line?

  • How do your prices compare to those of your competitors?