Liquidity: Unpacking This Common Term for Your Organization
Why Metrics Matter
Every business needs data and metrics to run effectively. These data points can help identify parts of your organization that require additional investment or change, drive strategic decisions, and create a path for you to better understand what you can do to grow and scale your business.
Metrics are important because they are indicators into how your business is performing and help create accountability, transparency, and benchmarks into how successful (or not) you are in your objectives.
Without them, you are making decisions and running your business blindly, which can lead to lost time, lost money, and a lot of headaches and struggles along the way.
If you are new to this all or a veteran in business and investing, these six metrics are ones to “ingrain into your brain” because they give you the best high-level representation of key areas of business and financial success.
The Six Foundational Metrics Punchlist for Every Business
Folks can argue a lot of things, but very few will take a look at this list and scoff at how important each and every one of these data points and metrics are for any business.
Whether you are an established software-as-a-service company who has raised capital from investors or a local plumbing mom-and-pop shop with 5 employees, understanding and working to incorporate these metrics in your business can drive significant value to you, your team members, and your investors (if you have them!).
Here are the six metrics you all should consider learning about and incorporating within your businesses (and investments - if you are one of our readers who deploys capital 🤑 ).
To keep things elegant and simple for you all to reference, we’ll bullet out each six with a ‘too-long; didn’t read (“TLDR”)’ summary so you can remember each of these if you were to ever get pulled on the side of a street for a business trivia game (could you imagine that… 🤣)
The TLDR Punchlist:
Revenue: How Do You Generate Money from Paying Customers
Gross Profit: How Do You Generate Profit After Deducting Costs of Your Revenue
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): How Do You Generate Profit Before Deducting Interest, Taxes, and Depreciation
Operating Income: How Do You Generate Profit After Deducting All Your Operating Expenses
Net Income: How Do You Generate Profit After All Expenses, Including Interest and Taxes
Free Cash Flow: How Do You Generate Cash From Operations, Excluding Capital Investments
Feeling Overwhelmed and Confused Still? It’s All Good, Keep Following Along with Us…
You’ve all heard the adage “Rome wasn’t built in a day,” right? Well, your knowledge and acumen into these six metrics, why they are important, and how to use them effectively in your business doesn’t have to come just from this article and quick punchlist either.
Valuate is here for you in this journey. Our app and this awesome newsletter (subscribe if you have not already! 😉) is built for sophisticated and new business owners and investors who are seeking the tools and insight to understand their financial data to drive better decisions and improve their businesses.
Brick-by-brick, we will give you the insight and information you need to understand the basics and advanced business topics (through our experience and insight in the Understand feature of our platform, as well as a curious business community in our Ask feature of our platform), and incorporate proper tasks and action plans to drive value creation and business change across your team and organization.
We will elaborate on each of these six foundational metrics in more content to come, so join us on the Valuate rocket-ship 🚀 , download our app, and let us know your thoughts and comments!
