Insights, Ideas, Results
In the previous post we mentioned that you need to hear customer and employee stories in addition to looking at formal reports and metrics.
One of the ways you can do this is by asking open ended questions to your customers, employees and other business owners to understand the reasons behind numbers. Below we have identified 10 questions that will get them talking.
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In the previous blog post we indicated that many types of small businesses have “standard” set of metrics that you can use as a starting point to determine the key metrics you should track for your small business. We discussed key metrics in the retail and restaurant business in the previous post. In this post we have shown the metrics for additional businesses – hotels / motels and service businesses.
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Every small business owner needs to look at the business reports daily, weekly and monthly on a regular basis to stay up-to-date with how their business is performing. You need to understand what key performance metrics to look at in those reports. We showed how to identify and track key performance indicators in this post.
You don’t have to start from zero when looking for key performance metrics for your business. Many types of small businesses have “standard” set of metrics. As a small business and franchise owner you should be aware of these metrics. In this post we will summarize the key metrics for retail businesses and fast food / restaurants.
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In the previous post we mentioned that many small business owners find it difficult to explain how their business is doing with the numbers backing up their words. It is even more difficult to predict how the business is going to perform few months down the road. However, it doesn’t have to be this way.
By identifying and tracking few key performance indicators (KPIs) any small business owner can not only figure out how the business is performing; but also forecast where it is headed. This is no different from when the doctor checks vital signs such as blood pressure, pulse, weight, etc. of the patient to find out what is wrong or could go wrong. You only need 5 or so KPIs to get a feel of the business performance.
Typically, these KPIs will be different for different industries. For example, the retail store should look at comparable sales and inventory turnover; while exercise facility would track customer turnover and average sales per customer. Most large publicly traded companies include these KPIs in their annual reports or in the financial analyst reports.
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In the previous post we mentioned that as a small business owner you should know the key numbers of your business by heart. These key numbers provide valuable insight in your business and act as early warning indicators. Without them you may not realize if the business is heading for trouble and by the time you do it may be too late.
We also advise you to spare some time from daily operations and spend 15 minutes daily and several hours weekly and monthly to go over the reports that show how your business is performing. In this post we will provide more details about these reports and what you should look for in them.
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If you answer this question with “Oh! It’s OK” or “Just like everyone else”; without backing that up with the sales, cost or profit numbers your business may be heading for trouble.
Whenever we meet with our business colleagues and clients we ask this general question to get a sense of whether the business owner has a grip on his/her business. Many times the answers are what we mentioned earlier. We probe them further by asking follow-up questions such as “why do you say so?” or “how is it compared to others or last year?” and if they don’t have good numbers to explain, we know they need to work on getting a handle on their business.
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Many small business owners we have met have misconceptions about marketing. They think of marketing as doing flashy advertising with catchy pictures and some coupons in newspaper insert or with a direct mail company. This underestimates the power of marketing and the value good marketing can bring to your small business.
We ourselves have fallen into this trap when we owned businesses in the past. The reason many small business owners, including ourselves, do this is because of lack of time and lack of understanding of what marketing is all about. We have thought long and hard about this when we operated small business and afterward. Based on that we have come up with 5 fundamental rules of marketing that when used properly are sure to improve your sales. Here they are in no particular order:
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Whether you are buying a business for the first time or you have purchased and sold number of businesses you cannot underestimate the importance of due diligence before signing on that dotted line. The mistake made at this stage can not only be costly in terms of financial losses; but it will get you stuck with bad business for a long time.
So what is due diligence? Due diligence is the process of looking at the business you are planning to purchase from multiple angles to verify that the financials match with what the seller promised earlier. Presumably, you have already done your homework in terms of market analysis, competition, and future potential before putting an offer with the seller. The due diligence comes into picture after the seller has agreed to your offer. It is usually one of the last steps in the buying process before you start preparing the closing documents.
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In 1961 President John F. Kennedy made a bold statement in his speech. He promised to American people and the world that before the end of the decade America would land a man on the moon and return him safely to the earth. When you think about it this was an enormous challenge. We didn’t even know what technology we would use to accomplish this. Many aspects of this mission had huge risks. And still, we found a way to accomplish this goal.
Such is the power of deadline. By setting a challenging deadline for the mission he set the entire nation into motion. Having a deadline somehow springs everyone into action. People simply find a way to make it possible one way or another.
The reason deadline works is because of how human mind is wire to react. When you give someone, or even yourself, a deadline they don’t want to disappoint the promise. Deadline gives them a target to shoot for. Without it they will not only not push themselves to complete it; but also keep the work going forever.
So how can you use the power of deadline to help you accomplish your goals even if they may not be as ambitious as putting the man on the moon? We have identified several ways from our own experience.
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If you are like many small business owners you do not put together a plan when starting your day. Instead you just react to whatever comes your way throughout the day. And even if you do plan your day in the morning; you start reacting to the requests and tasks that come your way throughout the day – things like customers calling to complain, employees calling in sick, store emergencies and many other operational issues.
In the previous blog post we mentioned that the ”to-do list” is a very powerful tool to plan your day and accomplish more in less time. However, when emergencies mentioned above start coming your way the to-do list gets thrown out the window and people start reacting to those emergencies. This is what we call the “Busy Trap” – you always seem busy; but don’t seem to accomplish much of whatever you had set out to do at the beginning of the day. At the end of the day you look back and think – “what the heck did I really accomplish today?”
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