Growth Ideas #5: Watching the Right Dials
It would not be an understatement to say that we are awash in data. We get reports from all manner of departments through our systems, email, intranet, meetings, conference calls and webinars. Information is everywhere and about everything. If can do it we can measure it and report on it.
The result of all of this clamor and data is that many vital and important things get lost in the sea of relatively unimportant or even useless metrics. When that happens and everything is considered important then ultimately nothing is important. If I’m trying to stay on top of everything I end up on top of nothing.
This is a true impediment to healthy, profitable growth. Businesses that grow are focused on only a small number of essential things. Greg McKeown, in Essentialism, calls them the “Vital Few.”
I would suggest no more than 5-7 Critical Numbers to focus on:
- Revenue—is your top line moving up, staying flat, or declining? Let’s think of this like a speedometer.
- Gross Profit—this is what’s left of revenue when you’ve spent what you have to to make or sell your product or service. The higher the gross profit the more actual Net Profit you will have when the books are closed. This is an indicator of the health of the revenue you generate. Let’s think of this as the oil pressure gauge.
- Operating Expenses (aka SG&A or G&A)—this is what you spend to simply run your business. Salaries, benefits, rent, utilities, etc. Spend too much of your gross profit and you have too little net profit. Let’s call this our temperature gauge.
- Profit (Net Profit, Net Operating Income, EBITDA)—these are not identical but most companies only measure one of these numbers. This is how much money you make. This is your gas gauge.
- Customer Relations—the number of customers you have. Is this number growing, holding or falling? This is a key metric to watch as well as customer feedback (NPS, surveys, etc.) Are they staying with you and what are they saying about you? Maybe this is your GPS.
- Inventory Levels—do you have what your customer wants? Enough of it? Too much? To not have what your clients want is to send them elsewhere; to have too much is to waste money. We’ll call this your gear shift indicator—Park, Reverse, Drive.
I am sure that many people smarter than me with all kinds of letters after their names will say, “Oh no, Mike. You have to watch more than that, a lot more!” To them, I say, “Reread the first two paragraphs.”
The moral of the story is that if you focus on the vital few and they are indeed vital and few, you will make the steps and improvements that will move the dial on those key metrics. That’s growth. All else is fluff and waste, bells and whistles.
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