True story: A wise CFO was meeting with the rest of his small start-up team, eighteen months (and a few pivots) into the group’s journey as a business. He was about to report to them on the firm’s financial situation. “Everything we do is about increasing value for all our stakeholders,” he began. “Let me show you how we measure that we’re doing that.”
Up came a slide with sixteen simple words:
- Revenue growth
- Cash flows
- Ability to obtain new business and deliver it profitably
- Intellectual Property
He landed there only briefly, just long enough for the team to grasp the five obvious and easily measured items the slide contained. Then he flipped to a second slide.
“And then there are the less easily measured, more subjective value drivers,” he said.
The team read the long list together:
- Size, depth, and breadth of the sales pipeline
- Share of potential market penetration
- Quality and depth of the customer portfolio
- Volume and breadth of the customer portfolio
- History of repeat and loyal clients
- Skills, experience, and specific expertise
- Contacts and network of the team
- Delivery methods and operating efficiency
- Succession plans
There were nods all around the room, a stated appreciation for the holistic approach to defining value, and some good discussion about the group’s resulting priorities.
My immediate impression on seeing this list was to write it down and share it here as a strong example of a business measurement scorecard – applicable to both start-ups and the largest enterprise teams. (Mind you, I’d only moments before it read Paul Graham’s good thoughts on the importance of start-up teams’ focus on doing things that do not scale, so holistic nurturing was on my mind, anyway.)
Are you measuring the health of your business – and the value you deliver to every stakeholder you serve – in terms of this extensive list? Are you pausing from time to time as a team to discuss performance across the span it represents, and not just looking at cash flows?
Do you have a recommended amendment or addition to this list?