My key KPI: Balanced scorecard
Welcome to ‘My key KPI’, a new weekly content series where we ask CFOs and FDs what metrics and measures they use to drive their businesses forward.
The aim is to understand how different finance professionals, across a broad array of industries and sectors, use data to inform their decision making.
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This week, we speak to Gemma Gowers, the recently appointed FD of Cult Wines, a scale up business that helps people invest in wine.
My key KPI: A balanced scorecard
“I had a strong interest in wine before I started this role,” said Gemma Gowers, the recently appointed finance director for Cult Wines, an investment manager in fine and rare wines.
She’s not just saying that to appease the new boss. An avid cook, Gowers completed her Wine and Spirit Education Trust level 1 qualification last year to help her better understand wine pairings.
But Gowers hasn’t been hired for her wine credentials. Cult Wines is a rapidly scaling business. Over the past few years it has opened offices in Shanghai and Hong Kong and turnover is climbing rapidly. “In 2016, turnover was £20m. In 2017, turnover was 33.7m,” said Gowers. “We’re forecast to do £55m this year.”
She’s been drafted in not just to help maintain this momentum, but to make the internal processes and controls scalable. “I’m also making sure that the new growth areas like in Asia, are sustainable,” she said. “I have to make sure we don’t lose that momentum when we move into new areas, particularly China.”
One of her biggest initial tasks is to audit the KPIs that Cult Wines is using to assess the performance of the business. “I’m looking beyond the traditional KPIs of profitability and efficiency, and I want to take a more balanced scorecard approach to things.
“That’s my overarching KPI: obviously I can interpret financial KPIs, EBITDA percentages, operating expense ratios, capital ratios etcetera, but behind those there are other operational KPIs to be considered.”
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Gowers looks at KPIs in terms of repeat business, customer needs, average sales, and geographic location (which helps identify new target areas). “Another one is the ease of access to the transaction. Is the customer on their phone? Do we need to invest in a mobile app?” she said.
Gowers gleans all this information from VinTrade, Cult Wines’s in-house, bespoke trading platform. “You need to have a really holistic approach to your business KPIs.
“Financial KPIs are very important, but they’re quite retrospective on their own. It’s all very well to say our EBITDA percentage is x, but through our trading platform we can get a whole host of information: repeat business levels, average transaction size, geographic location.
“You need to strike a balance between financial and operational.” This balance has another in-built advantage: it makes it easier for Gowers to communicate with the rest of the business. “When you speak to the rest of the business, you can start with the non-financial KPIs you can lead into the financial KPIs. It gives the people who aren’t knowledgeable of the financial KPIs an easier way to understand the business.”