When your customers, clients and most people in your life ask, "How's the business going?" The best answer is "Terrific!" There's no upside to giving any other response.

When your business advisor asks the question, understand that, whatever answer you give, the next question will be, "How do you know?" It's an important question and cuts to the heart of whether your management team has true situational awareness.

Have you heard the joke "I can't be out of money I still have checks!" Monitoring and understanding the key metrics of your business provide the tools for day to day management. When well defined, they also serve to bridge the business strategy and the everyday operational tactics.

So what might those "key metrics" be? Well, the term begins with the word "key." Turns out there are literally dozens of metrics from which to choose. The first task in determining key metrics is to be clear about to whom they are key. Investors will prefer some (EBITDA, ROI, etc.) and bankers (return on cash, debt to equity ratio, etc.). Accountants will choose familiar financial measures (net profit, margins, etc.) while production management will choose process metrics (reduction of steps, increased throughput, etc.). In practice, high performing organizations typically have a few shared goals for the whole enterprise and then functional and subgroups develop specific key metrics that clearly map to the overall goals.