Six Power Ratios to Start Tracking Now

Six Power Ratios to Start Tracking Now

Doctors in the developing world measure their progress not by the aggregate number of children who die in childbirth, but by the infant mortality rate – a ratio of the number of births to deaths. Similarly, baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base – as a percentage of the number of times they get the chance to try.

Acquirers also like tracking ratios, and the more ratios you can provide a potential buyer, the more comfortable they will become with the idea of buying your business.

Better than the blunt measuring stick of an aggregate number, a ratio expresses the relationship between two numbers, which gives them their power.

If you’re planning to sell your company one day, here’s a list of six ratios to start tracking in your business now to start building value.

1. Employees per square foot
2. Ratio of promoters and detractors The Net Promoter Score® methodology is based on asking customers a single question that is predictive of both repurchase and referral. The average company in the United States has a NPS of between 10 and 15 percent. Reichheld found companies with an above-average NPS grow faster than average-scoring businesses.
3. Sales per square foot
4. Revenue per employee
5. Customers per account manager
6. Prospects per visitor

Acquirers have a healthy appetite for data. The more data you can give them – in the ratio format they’re used to examining – the more attractive your business will be in their eyes.

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Franne McNeal, MBA Significant Business Results, LLC Significant GPS Small Business Growth Services