Does your business feel like it has stalled? Has it plateaued? Or flatlined?
Some time ago I had a coffee with a much respected founder and owner of an enterprise I had once worked in. He is very active as an investor in businesses to this day. His opening words surprised me. He said ‘You know Ian, the problem is that most businesses don’t know their numbers’. I thought it was a strange opening to a catch up coffee but the more I thought about it, the more I understood the wisdom of his words.
A focussed business
I have also noticed, that when talking with some businesses the answers to certain questions fall into two very distinct camps. When I ask a fledgling or unsophisticated business how they are doing I get vague and generalised answers. ‘We are busy’, or ‘Things are good’, ‘Things are difficult’ or ‘OK’ might be the general style of the reply. For those businesses that are more focussed, more sophisticated and more professional the same question will generally elicit a different type of reply. They may say ‘we only have 20 units to do to reach our all time best, we have four days to do it in and we are averaging 6 units a day.’ Or ‘we should end the month 7% ahead of last year and 3% above target’. The answers tend to be much more specific and are often very numeric.
So what numbers should we be focused on? Well that depends on the business but all businesses will be focussed on sales volume, profits and break even levels to a large extent. For many it will also be footfall, conversion rate, recovery rate, sales or profit per person. The list is endless but there will be a small quantity of metrics which will be critical to the well-being and sustainability of any business. We need to know those numbers and have them reported on regularly.
A boss of mine once commented ‘if you shake the numbers hard enough, the answers will drop out’. He was right. However it is a difficult thing to do if you don’t have enough of the right numbers within your business. You don’t need to be an accountant but you do need access to relevant, timely numbers. You need a financial cornerstone on your team. If the numbers don’t heavily inform your decision making you are playing a risky game.
Test and Measure
The secret to becoming expert is to test and measure. Which marketing initiative gave the most return on the expenditure? What is the cost of acquisition of a new client? What is the current lifetime value of a client? How can you reduce the former and increase the latter?
How many widgets do you need to sell to break even? At your current conversion rate how many opportunities to do business do you need to generate in order to sell the widgets that you need to sell so you can make the profit that you plan to make?
Shake the numbers hard enough and the answers will fall out. If the numbers in your business are robust enough you will be safe, if they aren’t you will always be in a precarious position and unsure what your priorities should be. ‘You know Ian, the problem is that most businesses don’t know their numbers’. How true!
This reason may or may not apply to you. It is one of the 10 most frequent reasons businesses seem to stall or flatline. I will be dealing with this and the other 9 reasons in my next seminar. Click here for details. Or Click here for details on the other 9 possible causes.