A company’s life cycle goes through various stages, including: seed/startup, growth, established, expansion, matured, and exit. No matter what the stage of the company, key financial metrics play a crucial role in a companies’ success. Owners need to understand what metrics are at the heart of their company’s operations. Those metrics may differ from owner to owner or industry to industry, and may vary depending on the growth stage of the company. The following is a list of key metrics that may are important to track, understand, and use for benchmarking:
Pre-tax net profit margin
Current ratio
Quick ratio
Working capital
Accounts payable days
Accounts receivable days
Inventory days
Cash demand period
Return on owner's equity (return on investment)
Return on assets
Debt to equity
Trade groups, surveys, and information providers are all potential resources for finding reliable data that can be used to benchmark your company’s metrics against industry standards. Be sure to find businesses of a similar industry, revenue size, and geographical location for your metrics. Your accounting firm should also have access to this information and be able to provide benchmark analyses as a standard service for their clients. Customized benchmarking enables companies to make informed business decisions and is a strong component of any well-rounded accounting service package.