A monthly value dashboard: twelve numbers that show whether value is rising

The twelve numbers

Earnings quality: numbers 1 to 3

1. Days to close the books. The number of days after month-end until the monthly accounts are final. It is the simplest measure of earnings quality, because everything else depends on timely numbers. Aim to bring it down steadily, and agree a realistic target with your bookkeeper and accountant.

2. Revenue, for the month and the trailing 12 months. Monthly revenue is noisy, especially in seasonal businesses. The trailing 12-month figure, the sum of the last 12 months, smooths seasonality and shows the real trend.

3. EBITDA, for the month and the trailing 12 months. Earnings before interest, taxes, depreciation and amortization, calculated consistently each month on a basis agreed with your accountant. Keep any adjustments, or add-backs, on a separate, documented line so the core figure stays clean.

Margins: numbers 4 and 5

4. Gross margin by service line or product. Revenue minus direct costs, as a percentage, for each main line. Watch for any line drifting down, which is usually the first sign of a pricing or delivery problem. Our margin and EBITDA guide explains where to look when it does.

5. Overhead as a share of revenue. Total overhead divided by revenue, on a trailing 12-month basis. It should be stable or falling as the company grows. A rising figure means overhead is growing faster than the business.

Recurring revenue: numbers 6 and 7

6. Recurring share of revenue. Revenue under agreements, memberships, retainers or contracts, divided by total revenue, trailing 12 months. This is the headline durability measure.

7. Renewal rate. Of the agreements that reached the end of their term this month, the share that renewed. Track the trailing three-month average as well, because monthly figures can be small. Our recurring revenue guide covers how to improve it.

Concentration: number 8

8. Largest customer share and top-ten share. Revenue from the largest customer, and from the ten largest, as a share of trailing 12-month revenue. If one channel or program drives much of your work, track that too, such as the share of jobs that depend on a particular rebate program or referral source. The direction matters most: you want these shares falling as the business grows.

Cash conversion: numbers 9 and 10

9. Receivable days. Receivables at month-end divided by monthly revenue, multiplied by the number of days in the month. Lower is better. A rising figure often means collection depends on someone who is too busy to do it.

10. Cash balance against a minimum target. Set a minimum cash balance that covers your seasonal low point plus a margin of safety, and show actual cash against it each month. Seasonal businesses should plan this a season ahead.

Owner dependence: number 11

11. Decisions escalated to the owner. A count, or a reasonable estimate, of decisions that came to you this month that fell within someone else's agreed authority. It should fall steadily as decision rights take hold. Our owner-dependency audit guide explains how to set those rights up.

Growth runway: number 12

12. Pipeline or backlog against target. For project businesses, the value of signed but unfinished work; for others, qualified opportunities or booked work for the coming months. Compare it with what the plan needs, not with last year.

Running the monthly review

The dashboard is only useful if it is discussed. A simple monthly review takes about an hour.

1. Circulate the dashboard two days before the meeting, prepared by someone other than the owner.
2. Start with the exceptions: anything moving the wrong way for two months running.
3. Initiative owners report on their plan initiatives and the numbers they affect.
4. Decide, record and assign: each action has one owner and a date.
5. Keep the meeting even in busy months. Shorten it, but do not skip it.

Colour-coding without false precision

Many owners mark each number green, amber or red against its target. That works, as long as the targets are set in advance and do not change to make the colours look better.

Reading a dashboard: a worked example

Illustration only, with assumed figures. Suppose a company's dashboard for March shows:

• days to close: 14, down from 40 a year earlier
• trailing 12-month revenue: up 6%
• trailing 12-month EBITDA: up 11%
• gross margin on the main service line: down two points over three months
• recurring share of revenue: 18%, up from 12%
• renewal rate, three-month average: 71%
• largest customer: 19% of revenue
• receivable days: 52, up from 41

The headline numbers look good, with revenue and EBITDA both rising. The dashboard shows three things the income statement would not. First, margin on the main line is slipping, probably a pricing or job-costing issue worth investigating now. Second, receivable days have jumped, which ties up cash and suggests collections have lost an owner. Third, the largest customer is nearly a fifth of revenue, a concentration that deserves an initiative of its own. The review would assign an owner and a date to each.

How the dashboard connects to the quarterly re-score

The monthly numbers feed the quarterly re-score of the eight value drivers. When you score earnings quality, for example, days to close and the stability of EBITDA are direct evidence. Over a value-creation plan of two to five years, the dashboard becomes the track record: a month-by-month history that shows the company did what its plan said it would.

Common mistakes

• Too many numbers. Twelve is plenty. Add a thirteenth only by removing one.
• Changing definitions. Calculate each number the same way every month, or trends become meaningless.
• Owner-prepared dashboards. If only you can produce it, it adds to owner dependence.
• Financial numbers only. Revenue and EBITDA tell you what happened; renewals, concentration and escalations tell you whether it will last.
• No targets. A number without a target is information, not management.

Getting started

Build the first version from whatever you can produce this month, mark gaps honestly, and improve it each month. If you would like help designing a dashboard around your own value drivers, it is part of our value-driver assessment and plan work. Call or text (604) 632-4959 to talk it through.