Formally, with the slightest business activity, the curve of the summary chart should go up and to the right. But this data cannot be relied upon, since such a movement of the line will be observed even in the case of an actual decrease in production volumes. Therefore, this metric does not reflect the real state of affairs in the company.
Investors look for information such as total transaction volume, monthly revenue, and user/customer growth, which can help identify early business trends. Graphs can be made on a quarterly basis if the company has frequent monthly fluctuations or is experiencing peak growth.
Tricks in Presenting Graphs
Various techniques can be used to advertising data package inflate metric values. Possible options include omitting the Y-axis designation; using smaller units of measurement to make the numbers appear larger; or defining growth only as a percentage. However, the latter method is effective only in the early stages, when the relative increase reaches impressive values; later, such tactics become useless.
Presentation of business metrics
Source: shutterstock.com
Order of presentation
The order of presentation of indicators may be arbitrary, taking into account the presentation regulations.
When investors first get to know a company, they are usually interested in the gross transaction volume (GMV), revenue, and order volume, as these provide a basic understanding of the company's size. Next, you should demonstrate to investors the potential for business growth. If the investor is satisfied with the key metrics, move on to other metrics.
According to one businessman, it is similar to a child being examined by a pediatrician. The doctor checks how much the height and weight have changed compared to previous visits and makes conclusions about the child's health and the absence of deviations from the norm.
Frequently Asked Questions About Business Metrics
There is usually a close connection between a company's business metrics. For example, profitability changes following net profit. Constantly monitoring the metrics reduces the likelihood of factors that hinder business development and cause unnecessary costs. So any enterprise should study the metrics and achieve optimal values.
What is the business metric of cash burn rate or Burn Rate?
This indicator determines how quickly funds are spent to ensure the continuous operation of the enterprise. It is of great importance for new projects. Lack of control over the rate of spending of start-up capital can lead to the loss of savings until the moment when production is established and sources of additional financing are found.
The calculation is easier to do this way:
Average monthly expenses = funds available at the beginning of the year minus funds available at the end of the year / 12.
What does accounts receivable indicate?
The amount of accounts receivable is affected by the payment method (prepayment or postpayment), as well as the payment deferment period and the maximum debt amount. As the amount of accounts receivable increases, the amount of available cash decreases, so it is necessary to ensure timely repayment of the debt and not allow it to increase excessively.
Accounts receivable are recorded on account 62 of the balance sheet.
Methods of homework control:
Prepayment requirement.
Cooperation with intermediaries.
Informing clients about payment deadlines.
Timely appeal to the court in the event of the client’s refusal to repay the debt (primarily if the debt has increased sharply).
What does the business metric GMV (gross merchandise volume) indicate?
This indicator characterizes the total volume of product sales, i.e. the amount of goods sold through the trading platform over a specific period of time. It includes the value of all transactions conducted on this platform. In addition, it can be used to assess the capabilities o