In setting a challenge for members of Mind Masters this month, I asked them to commit to a specific financial number that will propel them forward for the balance of this year and into next. Some have faced downturns due to the pandemic, others have forged ahead due to grants, loans or just good markets. But what number or numbers really need attention that would change the outomes?
Let me ask YOU, what number do you look at when trying to determine if your business is successful and growing or not? Most small business owners focus on Revenue (sales) or Profit. Although both numbers are big measurements for the business, they are the RESULTS of many things going on in the business. They are results based on what economists call “lagging indicators”, because they are what you can see after the fact (not before). In other words, revenue and profits are the EFFECT that you get, not the CAUSE.
It is like when a student getting an A or an F. The grade is the effect of how much attention he/she pays in class and how much studying the student has put in— these are all the causes of what number shows up on the report card.
Once the student takes the test, it’s too late to change the number that Grade. So it follows, of course, that if you want to change the effect, you need to focus on the causes of that effect.
So what should you be focused on? One of our Mind Masters members strongly recommended focus on expenses which might be one of the causes that creates those numbers to result. What else causes results in your business??
So here is the bottom line, you must figure out your critical numbers so you can measure (and improve) them, this means asking yourself the question, “WHY are my sales profits what they are?” Not WHAT are my sales and profits.
Your business has a handful of “critical drivers” — these are the numbers that tell the story of how your business is working (or failing), without even knowing what the sales are. What are you tracking daily, weekly, monthly that can improve your specific financial number to propel you forward for the balance on this year?