Small business owners work so hard. We constantly juggle all the balls. As Christians we want everything to get done and EVERYONE to be happy.
It is in our nature to worry long after we have locked the door of our business in the evening.
But how do we know we need to be worrying. Or better yet, what if things are going well and we don’t even know it.
I received a text early one Friday morning. “Call me when you can. I think we are losing a ton of money this month.”
It was like the 8th of the month.
When I called him he told me he looked at the income statement for the month and he was losing $70,000.
“What income statement were you looking at?”
“The one for this month.”
“This month only has a week in it.”
“Does that matter?”
“It does if you paid a bunch of the monthly bills in the first week, but only have a week of revenues.”
“Oh, so I don’t need to be worried?”
This happened to be the case in this example. He was worried for nothing because he doesn’t know what metrics are important when.
Small Businesses Run Professionally Excel
We may be small businesses, but we still need to run our businesses professionally.
As I am meeting with another client, his eyes glaze over as I ask him what his sales targets are for the year and inquire about the quota breakdown between the two salesmen.
He threw out a round number for sales and said his salesmen didn’t really have quotas.
“Are they on track to hit the year number? How do you know if your sales people are performing?”
The glazed look transformed to a slight bit irritation and a tinge of concern.
Metrics Must Be Relevant
Business metrics are not always sales and profit numbers. These are just the ones that are usually standard across all industries.
For my business I try to maintain a certain # of direct client hours.
Another may measure how quickly they can build a house or make an install.
Others may be how many employees they can place.
What is their shrinkage?
How many dollars did they give to charity?
How many hits to our website or customer complaints?
Did we maintain our margins on that job.
We All Have Key Indicators for our Business
We all have key indicators of our business. How do we know we are on target?
Why is this important?
Benefits of Tracking Business Metrics
Here are the main reasons why you need to know what the key metrics are for your business and TRACK them.
- Your team doesn’t know what goals they are reaching for. They won’t know if they perform well or not. And more important than salary to most people is being appreciated and knowing that they have done a good job.
- When we have a goal we stretch to achieve it. Knowing what metrics we are trying to reach will push our performance to work harder at achieving. It’s just human nature.
- Without metrics we will make poor decisions. How do you know which services are profitable? Can you afford to add warehouse space? There are so many decisions that become easy when you have metrics and can measure results.
- It’s being a good steward. We need to use our resources wisely. Understanding how effective our resources are is part of making wise decisions.
- It reduces or eliminates unnecessary worry. Well according to Jesus in Matthew 6:26-34, all worry is unnecessary. However, with all the responsibilities small business owners have I know we all experience it at times.
The lack of business metrics reminds me of this bible verse in Luke 14:28-30:
28 “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? 29 For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, 30 saying, ‘This person began to build and wasn’t able to finish.’
This verse exemplifies many of the points made above. Have you ever driven past an abandoned home that looks like someone ran out of money before it was done.
It’s so sad.
Not only did it surely cause worry,but the money and people’s effort put into it were wasted.
Just like in everything there needs to be moderation. It isn’t healthy to get hyper focused on metrics and statistics.
They are directional guides.
Motivators to stretch.
Information to make decisions.
data to beat people up with,
or to stress over,
or to give up because they aren’t achieved day in day out.
Think of metrics as another tool you have to use as you navigate the waters of entrepreneurship!
Do you have metrics for your small business? How do they help or hurt you?