Edition 173 – Heads Up
The problem with financial reports is they always tell the story after the fact – the end of the month, the end of the quarter or the end of the year. The result is reported anywhere from 1 week to 9 months after the period ends.
The simple fact is there is an easier way to know what is happening inside your business right now. And, if you know what is happening inside your business right now, you have the opportunity to create different numbers at the end of the month, quarter or year – not lament them.
With a number of the clients I work with, we’ve introduced a Business Tracking Sheet. It’s merely a spreadsheet that lists down the 12 to 20 key drivers that are in your business, right now. It tracks the data that generates the results that creates profit.
The power of this is that it tells me very early in the piece what is happening inside a family business. It tells you, as the family business owner or manager, what is going on, that you’re otherwise missing when you’re immersed in the day-to-day.
We determine what we’re measuring by starting with the end point – profit – then ask:
- What generates profit – the answer is generally revenue and the cost of generating that revenue?
- What generates revenue – the answer is generally a factor of enquiry, conversion and dollars?
- What generates the level of enquiry – it might be driven by tenders, quotes, phone calls, mailed reminders.
- What generates a higher or lower revenue – it’s usually attached to labour on site, productivity, output, efficiency.
You get the drift. Each client I work with is different (even ones in the same industry) in terms of what we record.
Why is it important to know this inside your family business? You can control the success of your family business simply by knowing what’s driving it, every single day.
Imagine that! Controlling your success by measuring business performance every single day.
In the past month, I’ve spoken with a number of business owners that are lamenting some underperformance in the first part of 2019. The problem is, they’re lamenting it once they’ve read the financial reports. That’s simply too late to change anything.
On the other hand, if you’re monitoring (and reviewing) daily what’s happening in your business, you ask questions about the performance in your business in the “here and now” – and can tweak what is happening to generate the result you’re after – not the result you’re left with.
This Week’s Tip
What you can measure, you can manage.