The KPI that improves when you lose a customer

Ratios move in the right direction for two quite different reasons: the business got better, or the denominator got smaller.

By Steve 5 min read
Abstract bridge artwork for The KPI that improves when you lose a customer

A management pack lands with three numbers pointing the right way. Gross margin percentage is up 1.8 points. Average order value is up 9%. Days sales outstanding has come in by six days. Nobody in the room can name the decision that caused any of it. That absence is the signal. Improvement that nobody chose is usually not improvement. It is composition. Something left the business, and the ratio that remains describes a smaller, differently-shaped business rather than a better one. The uncomfortable version of this: for most operating ratios…

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