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Value Creation Blog

KPI’s Lead To Higher Enterprise Value

Posted by Josh Patrick

Key Performance Indicator

I had an interesting experience today.  I asked a good question and might have helped a Client improve their bottom line by 4 to 10 percentage points.  This increase will help increase their profits by 10% to 35%.  Not bad for the two minutes it took to ask the question.

The question came from a review of KPI’s (key performance indicators) we were doing.  We were looking at production per hour and I noticed that certain month’s production per hour was much higher than others.  I first asked if it was because of a particular accounts volume in units.  The answer was no, it was because of the complexity of products made for a market segment they service.

As it works out the more complex the product the more money the company made.  In addition, the more complex the product the less competition and the higher margins the company could get from products like this.

The conversation then turned to doing a profile of potential Customers based on complexity of the product they make.  If this company only allows their sales force to work on companies that have a particular baseline in complexity for their product they will improve their profits by at least 10% and more likely 35%.

So the question becomes, what are the quality of the questions you’re asking around your business.  Do you even have KPI’s you’re measuring in your business?  If so, what ancillary questions can you ask that would allow you to earn outsized profits?

I’m curious as to how many of you question the outliers, especially the good ones, to improve profits in your company?  Oh, and those who do will see a huge increase in cash flow and enterprise value.  Not a bad thing all in all.

Josh Patrick

We’ve written a special report on strategic measurements in your business.  This report fits in with how to put strategic measurements in your business and using them to improve the level of service and products you provide.  To get this report, click on the button below.

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Topics: enterprise value, Key Performance Indicators (KPI), KPI

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