The Most Important Numbers to Track For Your Business
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Business Key Component: DATA
The Basics
Good data is necessary for any business. How are you doing? Are you making progress toward your goals? Do you need to make changes? Is there something going wrong that you need to fix? Just as important: What is going well that you don’t need to spend time discussing?
Only good hard data can provide the basis for productive discussion and decision-making. Generally, anything that is measured and watched changes behavior for the better.
The Desert Island Exercise
Picture your leadership team out on a tropical island on vacation. There is no phone, no internet, no connection with the outside world except for a piece of paper delivered to you each week. On that paper is a scorecard with 5 to 15 numbers that tell you how the company is doing. Based on those numbers, you decide if you need to fly back and ‘fix’ the company.
What are the Numbers?
The exact measurements will vary from company to company, but the most important goals for any business are generally to:
- Get new customers
- Get orders from existing customers
- Make sure customers are happy
- Serve those customers profitably
- Have cash
Maybe your business has a few unique goals that are outside of these broad areas – but these 5 are pretty universal.
The next steps are to take each area and: 1) be specific; 2) work backwards to determine the activities that lead to the goal; 3) check weekly. Let’s take #1 “Get new customers” in this example:
- Be Specific: How many new customers do you want and in what time period? To make the numbers easy, let’s say we want 52 new customers this year. That means we need 1 new customer per week – so that’s a good weekly goal, but what goes into getting that one customer?
- Working backwards, I know about half of our proposals are approved by new customers – so we need to make sure we are generating 2 proposals per week. Let’s say we know that only about 1 of every 3 meetings result in a proposal, so we need 6 meetings to get 2 proposals. If we are calling our contacts for those meetings and we know that 1 in 10 calls results in a meeting, we need to be making 60 calls per week. THAT’S the gold – the activity that is going to get you 52 new clients this year is to be making 60 calls/week.
- Every week we check and measure – did we make 60 calls last week. If not, why? Are the close ratios as we expected? If not, why?
We have broken down the process to the simplest variable – calls. Simple issues are easier to solve. If we measure and discover we didn’t make 60 calls last week, we can solve that issue. Do we need a better list? Do we need more time to make calls? Are our people not performing?
By the way: the goal of 60 calls is not aspirational – it is what is expected. Be reasonable – make sure the goal is achievable. What we want to know is if this task is progressing as we expected it to – and if not, then we need to solve that issue.
Compare that issue solving exercise to trying to answer the bigger question every week: Why didn’t we get our 1 new customer last week? Answering this question would require much more time and effort. That’s less efficient – and don’t you have better things to do with your time?
This is a simple example, but simple is better when you are growing a business. What goals can you break down into simpler components to measure weekly?
Report the Numbers
Create a simple spreadsheet. Across the top, use the headings:
- Who – who is responsible for hitting the goal
- Measurable – the name of the measurable
- Goal – the goal (expectation)
- Dates – keep 13 weeks of data visible so you can see trends
Real Life
At BlueHat Mechanical, our scorecard tracks:
- Revenue
- Net Profit Per Hour
- Billable Hour %
- Driver Safety Score
- Callbacks
- Discounts Given
- Cash Flow
- A few AR measures
- AP
- Probability-adjusted sales forecast for the quarter
- Outstanding PM Jobs for the month
- A few other checking numbers
Our leadership team meets weekly to review these numbers and solve issues. We have gotten to the point where we feel like we have a good pulse on the business and we know where to focus our attention (there’s only so much of that to go around!)
A serial entrepreneur over the past 17 years, BlueHat is Paul's third company. After successfully starting and selling two telecommunications companies earlier in his career, and being trained as a Professional EOS Implementer - he has first hand experience with the tools necessary for any company in any industry to thrive and grow. Now, Paul's passion is helping other business leaders discover the joy and freedom that running your own business is supposed to bring.
- The Most Important Numbers to Track For Your Business - August 16, 2017
Posted In: ACCA Now, Management
