When we started working with Adam he told us he didn’t have the time to measure stuff, let alone the time to compile and analyse the results.
Adam’s situation is typical of many small business owners.
While not all our clients say it to our face, we can see the anguish on their face when we start talking about metrics and reporting.
Here’s how we got Adam excited about numbers to the point where we had to put the brakes on him measuring too much.
We started by asking Adam, “What would you say to an athlete that was trying to run a record time but was not timing their efforts?”. Predictably he said he’d tell them they were crazy.
Next, we asked “How comfortable would you be flying on a plane whose pilot could not read the controls?” Again came a predictable response “Not very”.
“Or what about a doctor who prescribes medication without measuring any of your vitals like blood pressure, cholesterol, etc.” … Adam could see the theme.
Bringing it closer to home we asked “What about a business (not yours) that you invested your life savings into and the CEO didn’t know the profit margins on the work they were doing. They also didn’t understand the numbers behind their marketing so had no idea how to grow the business. How safe would you feel about your investment?” This one made Adam sit up a little straighter.
He knew where we were going, and we probably didn’t have to ask him the next question, but we wanted to drive the point home. You see Adam was not doing nearly as well as he wanted to—and on this point of measuring—he had his head in the sand.
Last question … “Adam, what’s the difference between all these examples and you and your business? If it’s important for all these other people to measure and read the results, what do you think might be good for you and your business?”
He got it.
There’s a business mantra “What gets measured gets managed”. And while we are huge proponents of this mantra, there’s another quote by Einstein that we also like. He says “Not everything that counts can be counted, and not everything that can be counted counts”.
For small business owners, both of these quotes need to be taken into account. When you are short on time and possibly lacking easy access to data (although this is rapidly changing with cloud accounting and other apps), starting simple is the key.
Follow these four steps to gain some meaningful data which will enable you to start making better businesses decisions.
- Brainstorm a list of possible things to measure (here are some to get you started)
- Marketing (lead sources, retention rate, website performance, referral rate, social media stats, campaign results, cost per lead, etc.)
- Sales (conversion rates [dissected by lead source and salespeople], pipeline stats [how many fall off where], average quote value, average job value, margin, sales activities, discounts, new vs. existing customers)
- Operations (major costs/sales, project completion duration, Work In Progress, quality stats, bottlenecks, scrap or waste)
- People (turnover, absenteeism, survey responses, revenue/employee, etc.)
- Financial – AR Days, AP Days, Inventory days, Gross Margins,
- Identify top 5 that will give you meaningful information for your business. Things to consider:
- Which number, if measured, will make other numbers less important (e.g. an employee survey may give you way more insight vs. measuring absentee days, and it requires fewer resources to measure)?
- Which numbers can we measure easily?
- Take the top 3 from this list and commit to measuring them for 90 days. If 3 is too hard, make it less. Your primary goal here is to develop the habit, make it easy to be successful and see the value from having some accurate numbers. Note: Allocate accountability for each number.
- At the end of 90 days, review what you’ve accomplished and do 1 – 3 of the following:
- Amend what you are measuring – you may have found out that was not the best thing to being measuring
- Add to what you’re measuring. Over time you’ll want to have a more robust scorecard than just 3 numbers. Gradually add to it as it makes sense.
- Develop a wish list of other numbers to measure. Having numbers on your wish list lets you know they are not forgotten and can forgo the temptation to try to measure too many at once.
- Be sure to look at the numbers at least weekly. The more often you look at them, the more beneficial they will be. The exception here is, of course, numbers that require long periods of time to change, though these are usually few. Also be sure to display data in a format that is meaningful. (i.e. sometimes you need to see trends vs. stand-alone numbers.) For example. # quotes mean more when there is something to compare it too.