One of the keys to success of any business is the importance of knowing your numbers. What does knowing your numbers mean? As a business owner, you need to understand what your financial numbers are telling you about where you have been, where you are now, and where you are going. There are 4 areas of focus that will help you feel more confident about your business. Each week I will share one area of focus. This week the focus is Knowing Your Key Business Metrics.
Most of you have heard of Dave Thomas, the founder of Wendy’s. Dave Thomas successfully created a thriving restaurant business from just one restaurant into the thousands across the world today. Whenever Dave visited one of his restaurants, he had one metric that he relied on to know if a store was profitable or not – buns sold. By knowing the buns sold of any store, Dave quickly knew the sales and profit for that store. He looked at this one measure daily across his business and that would tell him how his business was doing.
Think about your business – what one to three data points about your business do you look at that give you a leading indicator about how you did yesterday or last week? Previously I was part of the management team for AT&T. While we had a lot of data to look at I focused on 3 key metrics to tell me how we were doing daily.
These 3 metrics were customer opportunities, revenue per sale, and number of customers who stopped service. The key for you is to have 1 to 3 key metrics that let you know frequently (daily or weekly) whether your business is heading in the right direction. Keep it simple, don’t have too many metrics and make sure the ones you choose are easy to gather data on.
Eric has over 25 years’ experience in small business, startup, and large companies and has held numerous roles focusing on business and financial strategy in businesses. He is currently the CEO and Owner of EDGe Business Planning. EDGe works with small business owners to help them understand their financial and business information and use it to grow their business profitably. Contact us at hello@edgebusinessplanning.com.