Baseball’s leadoff batters measure their “on-base percentage” – the number of times they get on base – as a percentage of the number of times they get the chance to try. This is one of the many examples where data is being tracked in professional sports, with an awareness of the importance of data analytics in decision-making.

Similar to professional sports, buyers also like tracking key ratios in a business. The more quality ratios you can provide a potential buyer, the higher their respective comfort levels become with buying your business. A financial ratio provides key decision-makers with better insights into business operations.

 If you are planning to sell your company one day, here is a sample list of six ratios to start tracking in your business now:

 1. Ratio of promoters and detractors

The Net Promoter Score® (NPS) methodology, developed by Bain & Company and Satmetrix, is based on asking customers a single question that is predictive of both repurchases and referrals.  

Find out how to perform your own NPS here

The average company in Canada has an NPS of between 10 and 15 percent. Companies with an above-average NPS grow faster than average-scoring businesses. 

2. Sales per square foot

By measuring your annual sales per square foot, you can get a sense of how efficiently you are translating your real estate into sales. For example, annual sales per square foot for a respectable retailer might be $300. With real estate usually ranking just behind payroll as a business’s largest expense, the more sales you can generate per square foot of real estate, the more profitable you are likely to be.

3. Revenue per employee

Payroll is the number one expense for most businesses, which explains why maximizing your revenue per employee can translate quickly to the bottom line. Shopify, for example, enjoyed a revenue per employee of $420,000 in 2021, whereas a more traditional people-dependent company may fall under $100,000 per employee.   

4. Customers per account manager

How many customers do you ask your account managers to manage? Some sales managers juggle more than 400 accounts, and may not know each of their customers, whereas some high-end wealth managers have 50 accounts. It is hard to say what the right ratio is, but we recommend slowly increasing your ratio of customers per account manager until you see the first signs of deterioration (i.e., slowing sales, drop in customer satisfaction). Which tends to indicate you have pushed it a little too far. 

5. Prospects per visitor

What proportion of your website’s visitors “opt-in” by giving you permission to e-mail them in the future? As every business varies, there is no typical opt-in rate, because so much depends on the source of traffic. Instead of benchmarking yourself against a competitor, we recommend you benchmark against yourself by carrying out tests to beat your site’s historical opt-in rates.

6. Website conversion rate

Your website conversion rate is the percentage of users/visitors that sign up, purchase or download from your website. For instance, a 2% conversion rate means two of every 100 visitors to your website actually take action. According to Adoric, the average conversion rate for a website is between 1% and 3%. Some of our recommendations to increase website conversion rate include:

• Cross-promotion on your company’s social media platforms

• Include a pop-up to the thing(s) you want to promote

• Include links to website in email footers

Case Study

Whitehorn assisted a Calgary-based oil and gas manufacturing company in preparing a robust financial model with monthly forecasting capabilities. Our client understood the importance of tracking key metrics in improving the efficiency of his business operations, as well as providing a future buyer with key ratios for performance evaluation. Whitehorn had extended discussions with our client to determine industry-specific key metrics before preparing a financial model. With the ability to track key metrics, our client was better equipped to make better business decisions. In addition, there is a track record of key metrics recorded for potential buyers in anticipation of a future sale.

Buyers have a healthy appetite for quality data. The more quality data you can give them in the ratio format they are used to examining, the more attractive your business will be perceived. Contact Whitehorn today to find out how we can help you make your business more attractive to buyers.