How to Evaluate Company Performance

How to read Financial Statements (master this) 1. Start with the Cash Flow Statement Begin by reviewing the cash flow statement to see how the company generates and uses cash. It's divided into operating, investing, and financing activities, giving you a clear picture of cash movement. 2. Beware of Earnings Metrics Profits can be misleading due to various adjustments and manipulations. Focus on revenue as it is a cleaner indicator of business performance. Look out for one-time items and aggressive accounting practices. 3. Examine the Balance Sheet The balance sheet shows the company's financial position, including assets, liabilities, and equity. Pay attention to working capital, debt levels, and asset efficiency. A healthy balance sheet has a strong mix of assets and liabilities. 4. Connect the Dots Link changes in the balance sheet to the cash flow and income statements. For example, an increase in accounts receivable should match an increase in revenue and a decrease in cash flow from operations. Understanding these connections is crucial. 5. Analyze Ratios and Trends Use financial ratios to assess the company's health and performance. Key ratios include liquidity (current ratio), efficiency (asset turnover), solvency (debt-to-equity), and profitability (gross margin). Track these ratios over time to spot trends. 6. Understand the Industry Context Compare the company's financials to industry benchmarks and competitors. This context helps identify strengths, weaknesses, and potential opportunities. Different industries have unique financial characteristics, so use relevant benchmarks. 7. Ask Questions If something isn't clear, dig deeper. Reach out to the company's management, investor relations, or experts. Annual reports, earnings call transcripts, and SEC filings provide additional context. -- P.S. I'm Warren Wang, CEO and founder of Doublefin. Previously, I spent 12 years at Google in finance leadership roles, including Corp FP&A and as a finance director managing multi-billion-dollar marketing investments with a global team of 40 managers and analysts.

Last week, a CMO sent me their 'daily executive dashboard.' It had 37 metrics. No wonder nobody was making decisions. Measurement strategies (and reporting) should differ across teams/roles. DAILY DECISIONS (Performance Teams): - ROAS by channel - Traffic & CVR - Inventory & promo plans Measurement: - Platform metrics - Basic measurement - Last-click attribution is ok here - Incremental coefficients are nice to have Why: Speed over perfection. Daily optimization needs quick data. Tip: DO NOT send these to your execs unless you want your inbox roasted. WEEKLY OPTIMIZATIONS (Marketing Managers): - Campaign performance - Segment/audience behavior - Creative performance - Funnel analytics Measurement - Multi-touch attribution (MTA) - A/B testing (campaign/adset/ad) - Site/Landing Page CRO Why: Balance between speed and accuracy. Enough data to spot real patterns. MONTHLY STRATEGY (Department Heads): - Channel effectiveness - CAC by segment - LTV & RFM trends - Market share Measurement: - Incrementality testing - cohort analysis Why: Time to validate true business impact. QUARTERLY PLANNING (C-Suite): - Growth trajectory & Forecasting - Unit economics - Marketing efficiency (MER) Measurement - Marketing mix modeling - Scenario planning Why: Long-term strategic decisions need comprehensive data. The goal is to measure and report based on: - The speed of the decision - The team making it - The right measurement approach Performance teams need daily data for tactical optimization. Executives need quarterly trends for strategy. Sending both teams the same daily dashboard? - That's why your media team is drowning in "tweaks and signoffs". - That's why your managers don't have time to review trends. - That's why your executives are lost in the noise. Different teams, different decisions, different data needs. Match your measurement & reporting to your audience. ♻️ Share this with a marketer who needs it 🔔 Follow me for more rants on data + marketing

Most businesses drown in metrics. Too many KPIs. Too many dashboards. Too much noise. The result? • Teams lose focus • Leaders chase symptoms, not signals • Time is spent updating charts, not solving problems Here’s the truth: You don’t need more data. You need the right few metrics that actually drive performance. Here’s a simple 5-step approach I use to help teams cut through the clutter: 1. Inventory everything – List all the metrics, who uses them, and why. 2. Map to purpose – If it doesn’t support a decision or priority, kill it. 3. Identify the vital few – Pick 3–5 metrics per function that truly move the needle. 4. Build a tiered system – Align top-level KPIs to functional and front-line measures. 5. Eliminate, consolidate, automate – Make room for insight, not reporting theater. Bonus Tip: Run a quarterly “Metric Clean-Up” session—if a metric doesn’t drive action or decision-making, it’s a candidate for retirement. Leading vs. Lagging Check: Ask yourself: Does this metric help us influence the future (leading)? Or just tell us what already happened (lagging)? If your dashboard is 90% rearview mirror, it’s time for a redesign. More focus = better execution. Want help finding your “critical few”? Let’s talk. #BusinessOperatingSystem #KPIs #ContinuousImprovement #Leadership #LeanThinking #Execution #SimplifyToScale #OperationalExcellence #DataDrivenDecisions #BOS #LeadWithMetrics

STOP! Don’t Change Your Metrics Until You Read This This post is in response to the many questions I got after the video I shared with Dr. Eli Goldratt sharing his insights on how to align financial and operational measurements with a company’s goal. The question I got ... How can we evaluate whether we have good or bad measurements? Here’s my 3 Criteria framework to evaluate any measurement or measurement system — and a recommended metric that meets all 3 criteria. The Three Criteria of a Good Measurement System 1. Accurately Measures System STATUS (Ok/Not?) and TREND (Improving/Not?) Does your metrics accurately show whether the current status/trend is “OK” or “Not” . With accurate status and trend, you know WHEN to act…and WHEN NOT. Mistakes: • Type 1: Reporting system status is “OK” when its NOT • Type 2: Reporting system status is “Not OK” when it is OK. 2. Accurately Predicts Likely CAUSE(S) Does your Metrics accurately diagnose the “why” behind the status? With accurate CAUSE, you know WHAT TO CHANGE … and WHAT NOT. Mistakes: • Type 1: Reporting or Misidentifying a non-issue as a major cause.  • Type 2: Not Reporting or Overlooking a major cause 3. Drives Desired / Discourages Undesired Behaviors  Does your metrics positively influence behavior – to ensures parts do what is best, not for the part, but for the system? Good metrics guide each part on HOW to act…and HOW NOT to act. Mistakes: • Type 1: Incentivizing actions that harm overall performance (local optima). • Type 2: Failing to encourage beneficial behaviors. Example of a Good Measurement: The Cumulative Flow Diagram (CFD) A CFD plots cumulative orders received (demand) against cumulative shipments made (supply) over time. It offers a simple, powerful visual to assess balance vs. imbalance: Criteria 1: Accurate Status & Trend  • Parallel lines indicate a balanced system (“OK”) • Diverging or converging lines signal an imbalanced system (“NOT OK”) Criteria 2: Accurate Cause of Status & Trend  • Diverging Lines: Demand exceeds supply → Supply constraint • Converging Lines: Supply exceeds Demand  → Demand constraint Criteria 3: Incentivize Desired Behavior of Parts Its visual clarity makes it easy to understand and it can to be tied to incentives: • When lines diverge, focus on identifying and reducing excessive demand, and increasing capacity through better constraint exploitation or elevation. • When lines converge, shift your focus to securing more demand, and reducing capacity without compromising service time or quality. The CFD metric can be applied across the organization—from the company level to department level and even down to specific products or services, using either monetary value or unit counts for vertical axis. Remember FEWER measurements is BETTER! What measurements do you use that meet ALL 3 CRITERIA? or More fun… What is the worst measurement in your company that compromise 2 or all 3 criteria? Comments/Questions #goldratt #measurement

I lost $2.3M because I was drowning in metrics. Most entrepreneurs (including my former self) fall into one of two dangerous traps when it comes to measuring business performance. Let me share what I discovered after the expensive way... Trap #1: The "Gut-Feel" Brigade These are the entrepreneurs running their entire operation on intuition. "I know my business," they say. "I can feel when things are working," they insist. I get it. But here's the truth: You can't improve what you don't measure. Trap #2: The "Data Hoarders" Then there's the opposite extreme (this was me): • 47 different KPIs • Multiple dashboards • Daily metric reviews • Endless spreadsheets What did I get? → Analysis paralysis → Decision freezes → Constant strategy shifts → Bleeding cash like a hemophiliac in a tub of razors Here's what changed everything for me: The One Metric That Matters (OMTM) Framework Instead of tracking everything or nothing, identify the ONE metric that's currently blocking your growth. Examples from my consulting work: • E-commerce client stuck at $2M/year OMTM: Cart abandonment rate Result: Added $3M in profit • Services business launching in new geo OMTM: New meetings booked Result: $1M in new business in 8 months The magic happens because: 1. Clear focus 2. Aligned teams 3. Faster decisions 4. Better results How to Find Your OMTM: 1. Identify your current #1 business goal 2. List all metrics that influence it 3. Ask: "If I could only improve ONE of these, which would have the biggest impact?" That's your OMTM. But remember: It's not static. Your OMTM will change.  Focus on your One Metric That Matters. Everything else is just noise. P.S. - if you want to know how to scale without voodoo and gurus, I write and make videos about using the scientific method in business.

I wish I had learned this framework earlier in my career, when I was a Staff Accountant. At the time, I was booking journal entries and putting reconciliation schedules together from one month-end to the next. I remember finding things I thought management should be worried about but nobody seemed to listen when I would bring them up. Well now, I know that if I was applying this buy-in framework, things would have been much different. So if you want to be the go-to person for strategic recommendations in your organization and help others do the same, do these 4 things consistenly. 𝟏 - 𝐆𝐞𝐭 𝐃𝐚𝐭𝐚 𝐟𝐨𝐫 𝐁𝐞𝐧𝐜𝐡𝐦𝐚𝐫𝐤𝐢𝐧𝐠 Get in the habit of reading other companies’ financial statements and audit reports, especially if they are within your industry. [ Hint: Public companies and large not-for-profits usually have their financial statements available online. ] Start by downloading these documents and diving into the details. Comparing different companies’ financials will give you a broader industry perspective. 𝟐 - 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐞 𝐊𝐞𝐲 𝐑𝐚𝐭𝐢𝐨𝐬 Use the financial data to calculate essential ratios like current ratio, debt-to-equity ratio, and return on equity. These metrics are critical for benchmarking against industry standards and understanding where your company stands relative to others. How do you know that your current profit margin makes sense if you don't know the bigger picture? 𝟑 - 𝐀𝐧𝐚𝐥𝐲𝐳𝐞 𝐊𝐏𝐈𝐬 Identify and track key performance indicators (KPIs) such as revenue growth and operating cash flow. Compare these metrics with those of other companies in the industry to gain insights and identify best practices. 𝟒 - 𝐂𝐨𝐧𝐯𝐞𝐫𝐭 𝐃𝐚𝐭𝐚 𝐭𝐨 𝐈𝐧𝐬𝐢𝐠𝐡𝐭𝐬 Use the following framework to turn your analysis into actionable insights and get buy-in on your recommendations: > Observation: What does the data show? (i.e., "Revenue growth has slowed over the last two quarters.") > Analysis: Why is this happening? (i.e., "This could be due to increased competition and higher production costs.") > Implication: What does this mean for the business? (i.e., "If the trend continues, it could impact our profitability and market share.") > Recommendation: What should be done next? (i.e., "We should explore cost-cutting measures and evaluate new market opportunities to boost revenue.") By following this framework, you not only leverage your company’s data but also incorporate industry benchmarks to provide context. This helps stakeholders understand the broader landscape, see the implications clearly, and align with your recommendations, especially if you use an easy-to-understand format. What do you think?

80% of companies we onboarded this quarter were unknowingly wasting budget from blending their reporting. As we move into Q4, now’s the time to evaluate what’s truly driving revenue. A major mistake I see — lumping demand capture and demand creation into a single “inbound” bucket. This hides inefficiencies and can drain your marketing budget. Here’s a simple process to fix that: 𝗦𝘁𝗲𝗽 𝟭: 𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 𝘁𝗮𝗿𝗴𝗲𝘁𝘀 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗲𝗻𝘁𝗶𝗿𝗲 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 Don’t just focus on marketing goals—align with the company’s broader revenue targets. Discovery: Many companies fail to connect marketing with overall business goals, leading to misaligned budgets and wasted spend. → What’s the company’s revenue goal for the year? → How much of that growth is expected to come from marketing-driven efforts? 𝗦𝘁𝗲𝗽 𝟮: 𝗦𝗲𝗽𝗮𝗿𝗮𝘁𝗲 𝗶𝗻𝗯𝗼𝘂𝗻𝗱 𝘃𝘀. 𝗼𝘂𝘁𝗯𝗼𝘂𝗻𝗱 𝘀𝗼𝘂𝗿𝗰𝗲𝘀 Break out your pipeline metrics. Understand which lead sources are truly moving the needle. Discovery: The majority of revenue often comes from a few key sources. Not knowing which ones is a huge risk. → What percentage of pipeline comes from inbound vs. outbound? → How much is marketing contributing year-to-date? 𝗦𝘁𝗲𝗽 𝟯: 𝗠𝗮𝗽 𝘀𝗽𝗲𝗻𝗱 𝘁𝗼 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲 Identify how much you're spending on demand capture and demand creation, then map that to pipeline and conversion metrics. Discovery: Companies that track spend separately for demand capture and creation see 30% better ROI. → How much are you spending on each program? → What’s the cost per MQL, SQL, and closed-won by source? 𝗦𝘁𝗲𝗽 𝟰: 𝗠𝗮𝗸𝗲 𝘁𝗵𝗲 𝗰𝗮𝘀𝗲 𝗳𝗼𝗿 𝗯𝘂𝗱𝗴𝗲𝘁 𝘀𝗵𝗶𝗳𝘁𝘀 Use the data to argue for shifting more budget to where it's working. Discovery: Many companies over-invest in demand capture, even when win rates are higher in demand creation efforts like brand-building. → For example, “In the last 3 quarters, we invested $X in demand capture, but only Y% of those leads became closed-won. Let’s shift budget to demand creation for long-term growth.” TL;DR Stop hiding inefficiencies by blending your marketing efforts. Separate demand capture and demand creation, track performance, and make the right budget decisions for Q4 / 2025. Is data hygiene your issue to run a similar analysis?

$5,000,000 revenue. 100 employees. Zero real metrics. Here's the dead-simple system that fixes it this week: Last week, I was talking to a founder who built a high-touch SaaS platform for medical practices. Great margins, solid team, but he was hitting the leadership ceiling hard. When I dug into his operation, I found the problem immediately. No cascading KPIs. No clear metrics. No visibility into who was actually performing. He was running a $5M business like a corner store. Making decisions based on gut feel. Hoping people would figure it out. Delegating without any way to measure results. That's not leadership. That's expensive guesswork. Here's the exact framework we used to fix it: The 3-Level KPI Stack Level 1: Company KPIs (3-5 maximum) Monthly recurring revenue growth Customer acquisition cost Net revenue retention Gross margin percentage Level 2: Department KPIs (tied directly to company goals) Sales: Lead conversion rate, average deal size, sales cycle length Product: Feature adoption rate, bug resolution time, user engagement Support: Response time, resolution rate, customer satisfaction Level 3: Individual KPIs (tied directly to department goals) Sales rep: Calls per day, demos booked, deals closed Developer: Features shipped, code review completion, sprint goals hit Support agent: Tickets resolved, first-call resolution, satisfaction score The Weekly Execution Process: Monday: Everyone submits their numbers in a shared Google Doc Wednesday: Department heads review and flag issues Friday: Company-wide brief on what's working and what's not No fancy software. No complex dashboards. Just 5 minutes a day to get brutal clarity. The moment you install this system, weak performers can't hide and strong performers get the recognition they deserve. Every decision based on feelings costs you money. Every decision based on data makes you money. Ready to stop running your million-dollar business on vibes? I'm sharing the complete KPI framework that turns chaos into clarity in my upcoming workshop: https://buff.ly/BRpKAKr

Companies and their CEOs obsess over Profitability KPIs. But measuring Profit doesn’t drive Profit. Here’s the problem: Most leaders don't track the right metrics. They don't understand why they matter. They ignore stakeholder perspectives. If you don’t know and act on what the numbers are telling you - you’re not managing profitability. You’re just collecting data. Let’s fix that. Here are 16 Profitability KPIs every CEO and CFO needs to master—and how to extract the insights that drive smarter decisions: ■ Efficiency and Margins 1// Gross Profit Margin Ratio ↳ Why it matters: high margins signal strong pricing power or cost efficiency. 2// Contribution Margin ↳ Why it matters: critical for setting prices, understanding break-even points, and ensuring your products are profitable. 3// Operating Profit Margin Ratio ↳ Why it matters: reveals how well you’re managing core expenses 4// Net Profit Margin Ratio ↳ Why it matters: measures whether your business model scales profitably. 5// Return on Assets (ROA) ↳ Why it matters: shows how effectively your assets generate profit. 6// Return on Equity (ROE) ↳ Why it matters: measures investor return on their investment. 7// Return on Investment (ROI) ↳ Why it matters: helps prioritize high-ROI projects and avoid initiatives with weak returns. 8// Return on Capital Employed (ROCE) ↳ Why it matters: indicator for how well your business uses all available capital to drive profits. ■ Earnings and Market Performance 9// Earnings per Share (EPS) ↳ Why it matters: tells shareholders how much value each share represents. 10// Price-to-Earnings (P/E) Ratio ↳ Why it matters: gauges whether your stock is fairly priced based on earnings. 11// Dividend Yield Ratio ↳ Why it matters: income-focused investors seeking regular returns. 12// Dividend Payout Ratio ↳ Why it matters: balances reinvesting for growth with rewarding shareholders. ■ Cash Flow and Productivity 13// Operating Cash Flow Margin ↳ Why it matters: shows how well you convert revenue into cash. 14// Profit Per Employee ↳ Why it matters: tracks workforce productivity—a crucial metric for scaling efficiently. ■ Advanced Profitability Metrics 15// Economic Value Added (EVA) ↳ Why it matters: measures value above the company's cost of capital. 16// Break-even Revenue ↳ Why it matters: knowing your break-even helps you set realistic sales targets and avoid losses. The takeaway? Stop chasing KPIs for the sake of it. Start using them to lead smarter and grow faster. Want to join the 1% of CEOs who lead with financial intelligence? ▷▷▷ Join me tomorrow for a free webinar for CEOs, VPs, Managers, and leaders and start making 100% better business decisions: https://bit.ly/ceojan18 ▷▷▷ Transform your financial acumen in 6 weeks - live program, spots are limited, starts January 29: https://bit.ly/3ZCI0kr ♻️ Like, Comment, Repost if this was helpful. And follow Oana Labes, MBA, CPA for more

20 profit ratios that will transform how you analyze any business The numbers never lie, but you need to know how to read them 📊 Let me break down the most critical financial metrics you'll ever need 👇 ➡️ CORE PROFITABILITY RATIOS These ratios tell you exactly how well a business turns revenue into profit: 1️⃣ Gross Profit Margin The foundation of business profitability - what's left after direct costs. When this number drops, it's often the first sign of pricing pressure or rising material costs. 2️⃣ Operating Profit Margin This strips away the noise and shows pure operational performance. Want to know if a business is actually good at what it does? This ratio tells you. 3️⃣ Net Profit Margin The bottom line that matters. Shows exactly what you're left with after everything's paid. 4️⃣ EBITDA Margin Strips out accounting decisions to show true operational performance. Critical for comparing companies with different capital structures. ➡️ RETURN RATIOS - THE REAL PERFORMANCE INDICATORS 5️⃣ Return on Equity Your shareholders' report card. This number can make investors either jump for joy or run for the hills. 6️⃣ Return on Assets  Shows how well a company uses its assets to generate profits. This ratio becomes crucial when comparing asset-heavy industries. 7️⃣ Return on Capital Employed The heavyweight champion of performance metrics. It's like ROE and ROA had a super-smart baby. ➡️ EFFICIENCY RATIOS Now we're getting to the good stuff… 8️⃣ Asset Turnover Reveals how efficiently a company generates sales from its assets. Higher ratios usually mean better operational efficiency. Think of this as your business's speedometer. The faster it spins, the more efficient you are. 9️⃣ Inventory Turnover Critical for retail and manufacturing - shows how quickly inventory moves. Lower numbers might signal obsolete stock or poor purchasing decisions. 🔟 Accounts Receivable Turnover Measures how fast a company collects what it's owed. This ratio directly impacts cash flow - the lifeblood of any business. ➡️ MARKET PERSPECTIVE RATIOS 1️⃣1️⃣ P/E Ratio The market's expectation of growth packed into one number. But remember - high P/E isn't always better. It's about whether the company can meet those expectations. 1️⃣2️⃣ EPS Growth Shows the rate of earnings growth per share. This becomes powerful when tracked over multiple quarters. === Three principles I always follow when using these ratios: 1. Compare within industries - ratios mean different things in different sectors 2. Look for trends - a single number means nothing without context 3. Use multiple ratios - they work together to tell the complete story Which ratio do you find most valuable in your analysis? Share your thoughts in the comments below 👇