Jeremy Hunt -- the CFO, not the politician -- is an investor at heart. He is the co-founder of InvestorConnected, an analytics platform for startups and scaleups to help them present their information to investors.
'Our goal is to help small and scaling businesses grow by providing them with the tools to develop investment ready business plans,' says Hunt. Along with being the co-founder, Hunt's role as CFO is to keep the InvestorConnected's growth on track.
Much like the businesses they work with, the company is itself a startup. It's not an easy job, but Hunt identifies two metrics he keeps a close eye on. 'Everyone agrees that when you launch a new business or product, traction and momentum are key. Especially relevant in this situation, but often overlooked, is Financial Momentum; in particular monthly revenue and cost growth (burn rate).'
Monthly revenue growth is powerful because it 'shows the trend of total revenue generated by the business month-on-month,' Hunt explains. When a company goes through a growth phase, profits are generally reinvested back into the business, meaning the more revenue generated, the faster a business can grow.
'Revenue growth provides us with a simple and easy to understand metric to predict how fast we can grow our business. Couple this with the cost burn rate and you have something very powerful in predicting how a business is likely to grow - it is something we advise our start-up clients to pay particular attention to.'
The second KPI Hunt monitors is Trend of Return on Sales (RoS). This measure is more useful for an established but growing business. 'RoS is one of the classic investor ratios, which if looked at in isolation will tell you how well a business is turning its revenue into profit.
'By analysing how this ratio grows or falls as a business grows, we are able to determine if the business is structured to be more profitable the bigger it becomes, and provide indications of how it will perform when scaling up.
'A well-structured business should maintain or increase its RoS as revenue grows; whereas one that sees a diminishing RoS with revenue growth may indicate future problems ahead if it continues to grow without changing the way it operates.'
By way of example, Hunt references an analysis he has done of Uber London's numbers. 'The report uncovered some interesting findings, including a RoS of under 7%, coupled with a cost burn rate matching revenue growth.
'The resulting low profitability is far less than most people expect, and when coupled with a saturating market with increasing external pressures, the implications are that the business will drastically have to alter its business model if it wishes to maintain or improve long term profitability.'
For business owners who want to scale a KPI's effectivity is determined by your follow through. 'A KPI is only useful if action can be taken off the back of it, and action should be taken when a KPI moves in a certain direction or hits an important threshold.
'Without understanding the importance of what a KPI is telling you, and therefore the evolution of the business, you face the risk of not being able to take decisive action at the right time.'
What are some KPIs or metrics you monitor in your business? Comment below!
'Our goal is to help small and scaling businesses grow by providing them with the tools to develop investment ready business plans,' says Hunt. Along with being the co-founder, Hunt's role as CFO is to keep the InvestorConnected's growth on track.
Much like the businesses they work with, the company is itself a startup. It's not an easy job, but Hunt identifies two metrics he keeps a close eye on. 'Everyone agrees that when you launch a new business or product, traction and momentum are key. Especially relevant in this situation, but often overlooked, is Financial Momentum; in particular monthly revenue and cost growth (burn rate).'
Monthly revenue growth is powerful because it 'shows the trend of total revenue generated by the business month-on-month,' Hunt explains. When a company goes through a growth phase, profits are generally reinvested back into the business, meaning the more revenue generated, the faster a business can grow.
'Revenue growth provides us with a simple and easy to understand metric to predict how fast we can grow our business. Couple this with the cost burn rate and you have something very powerful in predicting how a business is likely to grow - it is something we advise our start-up clients to pay particular attention to.'
The second KPI Hunt monitors is Trend of Return on Sales (RoS). This measure is more useful for an established but growing business. 'RoS is one of the classic investor ratios, which if looked at in isolation will tell you how well a business is turning its revenue into profit.
'By analysing how this ratio grows or falls as a business grows, we are able to determine if the business is structured to be more profitable the bigger it becomes, and provide indications of how it will perform when scaling up.
'A well-structured business should maintain or increase its RoS as revenue grows; whereas one that sees a diminishing RoS with revenue growth may indicate future problems ahead if it continues to grow without changing the way it operates.'
By way of example, Hunt references an analysis he has done of Uber London's numbers. 'The report uncovered some interesting findings, including a RoS of under 7%, coupled with a cost burn rate matching revenue growth.
'The resulting low profitability is far less than most people expect, and when coupled with a saturating market with increasing external pressures, the implications are that the business will drastically have to alter its business model if it wishes to maintain or improve long term profitability.'
For business owners who want to scale a KPI's effectivity is determined by your follow through. 'A KPI is only useful if action can be taken off the back of it, and action should be taken when a KPI moves in a certain direction or hits an important threshold.
'Without understanding the importance of what a KPI is telling you, and therefore the evolution of the business, you face the risk of not being able to take decisive action at the right time.'
What are some KPIs or metrics you monitor in your business? Comment below!
