Do you know your numbers? Big corporates always know their numbers and in great detail. It’s what they base all their decisions on. So why don’t start ups and SMEs know their numbers when making decisions which could change the whole direction of their business?
The numbers in your business are not just how much money goes in and out but the profit. In fact this is the most important number! Turnover is just a vanity number although it’s the one that’s often asked for and most frequently quoted.
Turnover tells you how much money is coming into your business but it doesn’t reflect how much is going out, or the difference between the two, ie the profit.
If you have several products or services, do you know which one is the most profitable? Or the one that rarely sells? Having a product that sells well but makes little profit is very different to having a product which sells in fewer numbers but at a higher profit.
Your customers are also a key factor in your business.
Do you know how many return time and time again and continue to buy from you?
Or how many buy once and never return?
Knowing who your best customers are and how much they spend with you on an annual basis will also help guide your strategy. Having a few key customers who buy regularly is far better than lots of one off customers who are expensive to service.
The cost of finding new customers is high compared to looking after customers you already have. Churn is therefore a key number to be watching.
The same applies to staff. A high churn in staff is a costly expense to your business. Having happy, loyal staff who stay with you for a long time is much more cost effective and will build a much healthier culture than one where staff are always coming and going.
If churn is an issue in your business, then drilling down to find out why will also lead to you making better decisions based on real data and what is actually happening on a day-to-day basis.
What about your internal processes? How quickly do you answer the phone? Are you losing business because it takes too long to answer the phone or the call goes to voicemail?
If you are losing business then having a call answering service might be the answer but until you know the volume of calls, the number that are answered and more importantly, how many are missed, you are unlikely to see the benefits. Again, working with real numbers will give you a much better idea and help you make a more informed decision.
These days customers want instant answers. If they don’t get them, they will move on to your competitors. Is that really what you want?
Customer reviews are also vital to monitor. We all go straight to Google or a review site to check out what other people have said before we make buying decisions, whether that’s where to eat, which film to watch or what to buy and from where.
Knowing your numbers and making informed decisions based on reliable data has never been more important. It could make the difference between success and failure.
I have written a book based on my experience of creating a balanced scorecard in the Department for information Services in the House of Commons. The balanced scorecard I produced was used by the Departmental Directors to make decisions on the use of resources. They had a budget of £22m so we’re talking big decisions which affected a lot of people.
The success of those decisions was based on data which you also have in your business.
Knowing what tells you that your business is a success – or not – is vital. Once you start to track that data in a simple spreadsheet which shows you at a glance what is happening in YOUR business, life suddenly gets a whole lot easier.
Can you afford not to “know your numbers”?
Buy the Know Your Numbers E-book and work on YOUR business so that you know what is happening and make decisions based on YOUR data.