Measuring To Manage

What you don’t measure you can’t manage.

When you have a problem with your car – the clutch is sticking, the wipers don’t work, the door won’t lock or whatever – would you take it to your mechanic, saying, “My car needs fixing. Can you do it?”
To which he says, “No problem, I’ll have it done in an hour.”
No way, José! You don’t make him guess what’s wrong – you tell him what you needs fixing.

You get specific.
When you have a problem with your body – a headache, constipation, sore knees or whatever – would you take yourself off to your doctor and say, “Hey Doc, my body’s not right. Can you fix it?”
To which he says, “No problem. Take these blue pills and stay away from tax inspectors and in-laws and you’ll be right in a week.”
Again, no way, José! You tell the doctor exactly what’s ailing you and, with a little prodding and poking, she’ll come up with a remedy for that particular problem.

So with your business – you’re the doctor or mechanic. You may call in other experts from time to time but, on a day-to-day basis, you’re the one doing the repairs and maintenance.
But what are you fixing? What is the specific problem? If you were to take your business to a business coach to fix, what would you say? “Hey coach, can you fix my business?”
And he’d say, “So, what’s actually wrong?”
And you’d say, “Dunno, it just needs fixing!”
No way, José! You’d have to tell him a whole lot of specific figures and he’d work on those.

So, you’re the coach – how many facts do you know? What specifics do you have to work with?

• How many people “visit” your business each day? This may be physical visitors, email/website ones, phone-ins or however it is that your customers get to buy from you.
• What percentage of these visitors become customers i.e. they actually buy something?
• Has this percentage increased or decreased over time?
• How much is the average sale per customer?
• Has the average sale per customer (or per visit) increased or decreased?

These are not marketing or subjective questions, like “why do people come to your premises?”, “why do they buy?” and so on. These questions are simple, factual, number questions ... and if you know the answers, you’re one in a million amongst business owners. Most owners do not know and do not try to know – they’re trying to fix or improve a business they know little about.
However, armed with some basic facts, you then have some useful tools to work with.

So, start counting visitors – people who walk into your shop, people who phone for a quote or however they come to you. Don’t get too hung up on it ... if you’re a vet, do you count people or animals? If you have a women’s clothing store, do you just count women or do you count everyone who comes in? If you have a toy store, do you count adults, children or both? Panic slowly. There and no rules here, except your good common sense – decide what/who is reasonable to count and stick to that. Don’t choose dogs one month and people the next. What you start with, continue with. Common sense and consistency are most important here.

Do it every day as it is helpful to see if particular days of the week are better than others. Then, add up your daily visitors, daily customers and daily sales, and you have your first KPIs (Key Performance Indicators) – customers/visitors and sales/customers. Use a simple spreadsheet or a big whiteboard, whatever works for you.

What do you do with those figures? The first is to realise that we’re either pessimists or optimists and the figures will probably be a surprise. This is your reality check. This is the solid base from which we can begin the work.

Secondly, this is the Great Mystery of business ... maybe of life. When you start focussing on a fact, on a specific, it either begins to improve itself or you find ways to improve it – ways you had never thought of before. So, for the next month, start counting visitors, customers (visitors who buy) and your daily sales – every day.

Over the next four weeks, while you’re doing this, we’ll give you legal and accounting information about different business structures, and we’ll then return to improving customer retention, sales per customer and, ultimately, profit. Happy counting!

Philip Bradbury

Philip Bradbury (BBS, ACA, CAT) has been a credit manager, commercial and chartered accountant, company director, business owner, business coach and lecturer at university, polytechnic and Chamber of Commerce. He has also been a corporate trainer in England. He has written for magazines in New Zealand, Australia and South Africa. His website is www.bbcorp.info and you can email him at philip@bbcorp.info.