The Right Process For Using Metrics In Your Business

If you have been in business for at least a couple of years, then you most likely look at some sort of metrics.  Even if you haven’t been in business for that long, the sooner you can understand the importance of looking at numbers, the better off your business will be.  The right process for your business metrics is about not just looking at your numbers but understanding what they mean and using them to affect change in your business.

Metrics come in all shapes and sizes.  You may get metrics from your profit and loss, balance sheet or cash flow statement.  You have web analytics such as Google analytics, Facebook insights, stats from your web host, etc.  You also have specific company metrics that you probably keep like number of new customers, customer retention, conversion rate, product sales numbers, etc.

There are a lot of small business owners who look at their numbers (there are also many that don’t) but the problem lies in not looking at the numbers but not knowing what you are looking at.   When I initially work with a client, their first response when I ask them what they do with the beautifully organized spreadsheets that they keep and they have one of two answers.  They say that they either get really happy because the numbers look good or really sad because the numbers are short of where they need to be.  That really is sad.

The numbers that you keep in your business should drive specific behavior.  Peter Drucker said you can’t manage what you don’t measure.

With that being said here’s a basic process  for looking at your numbers and then do something with them.

1. Set company objectives and create a yearly business budget.  If you don’t know what you are trying to do or where you are trying to go there is no need to measure anything.  Start by setting clear and specific objectives and create a budget forecast for your business.  It doesn’t matter that when you read this we are already into the year, set it anyway.
2. Decide what you’re going to measure.  If you have ever measured a lot of different stats for your business then you know that it can be overwhelming to have to manage what all that means.  My suggestion is to pick 3-5 key numbers that ultimately determine the health of your business so that it’s easy for you to manage.  This may require some trial and error so prepare to be wrong and stay flexible so that you can change course.
3. Get someone to gather the numbers for you.  Here’s where you can really go wrong with gathering numbers by trying to do it yourself.  You’re just one person.  You have a team for a reason.  Teach them how to pull and gather the appropriate numbers so that all you are doing is analyzing them.
4. Schedule time for review.  Schedule specific time every week to look at your numbers.  This should be a rhythm that you get into every week.
5. Always ask yourself “why?”.  As you review your numbers, ask yourself why things are the way they are.  You don’t just do this when things are behind pace, you also ask this question when things are going well.  Don’t make the mistake of thinking that because things are going well you don’t need to worry about it.  You do.  Don’t stop looking at these numbers until you are satisfied that you have a good feel for the cause of each metric good or bad.
6. Create specific plans.  Once you have identified issues and causes.  It’s important to put a specific game plan in place to either keep doing what is working or change course in areas that aren’t working.  This is where the behavior change comes in.  For instance, a lot of times when business is slow for a smaller business, it’s because they are neglecting their marketing.  If that’s the case, you know that you have to put your foot on the gas and really rev that part of the business up to get it going again.
7. Repeat.  Keep analyzing and keep game planning.  Continue to analyze the set of metrics that you are looking at to ensure they are the right ones.  Continue to look at the metrics weekly to see how you are doing.  Keep game planning around your analysis.

There are a lot of business owners who aren’t comfortable looking at their accounting documents.  That’s okay, you can learn it.  A couple of initial resources to help you would be your local accountant who currently works with small businesses and can help you make sense of your books.  Another great resource is the book Financial Intelligence for Entrepreneurs.  This book breaks down the ABCs of the accounting of your business.

Some business owners bristle at managing by numbers as they say their business isn’t just numbers but it’s about people.  While I applaud business owners who care about their people, for those who are thinking that, here’s a question for you.  Who cares about your people if there isn’t a place for them to work?  If you care about your people, you will look at the numbers and use them to help manage positive outcomes in your business.  This, in turn, allows your employees to still have a job and you to have a successful business.

Getting your arms around your numbers may seem daunting at first but it will make your business easier to run and manage over time.  Once you master this practice, you can put yourself in the top percentage of business owners operating in your space because most aren’t doing this and their business is suffering as a result.  Put the right process for using metrics into your business and watch the positive transformation that happens.