Edition 40 – WTF
Now, before you start to panic, I’m not using that as a profanity! As far as I’m concerned, WTF stands for “Where’s the Figures?”
Put simply, too many family businesses don’t look at the numbers. If they do, it’s not often enough. When they do, it’s usually too late after the fact to be able to impact on the result.
Unless you know where the figures are in your family business, you won’t know what is happening in that business on a daily, weekly or monthly basis. You think you do, but all you’re aware of is the noise of the day-to-day, not whether or not that noise is creating progress and forward motion.
If you don’t know where the figures are, you’ll keep ambling along, doing what you’ve always done, but not knowing if what you are doing is building profit, adding value or improving the goodwill of the business.
The figures you need to look at regularly will vary from business to business, let alone industry to industry. I’ve heard some business commentators advise there are key numbers across all businesses that the owners and managers of those businesses need to know. My response to those commentators is simple – that is absolute rubbish! Here’s why, with an example.
Let’s say your business is a Bakery. Most industry standards and available industry information will be generic. It lumps all the results together and, surprise, surprise releases a standard or generic set of numbers. Which are rubbish! They mean nothing to an individual bakery that:
- Might be part of a franchise chain.
- Might be an independently owned operation that makes basic bread and cakes.
- Might specialise in high end cakes and patisseries much like the ones in Acland Street in St Kilda.
- Might be located in the wealthy Eastern Suburbs of Sydney vs. another located in Mt Druitt in Western Sydney.
- Might not have a retail presence.
The figures you need to look at regularly in your business will vary. Profit should not be the dominant one. Now, that may sound counter intuitive. However, you have to remember that:
- Profit is a result.
- Results are determined by activity.
Hence, you need to look at the activity that takes place in your business to determine what you need to monitor. Here’s some examples of activity that may apply in your family business:
- Number of enquiries received.
- Number of quotes prepared.
- Conversion rate.
- Production output per person per day.
- Chargeable hours per person per day.
- Dollar value of invoices raised per day.
- Actual vs. Budgeted profit per project.
It’s my firm belief that most businesses need only monitor between 7 and 12 key numbers in their business. Any less and it is irrelevant. Any more and you bombard yourself with too much data and will experience the paralysis of analysis.
If the family business that you own or manage needs some help in working out WTF, why not drop me a line at email@example.com?
This Week’s Tip
Profit is the sporting equivalent of the full time score or the chequered flag. It’s what takes place during the game or the race that will determine whether you win the premiership or take the top step on the podium.