Are you tracking the right numbers for success?

We are quickly approaching the halfway point of the year.  By now you should be seeing some clear indicators for the direction of your business this calendar year.  But are you tracking the right numbers?  It’s not always easy to know which numbers are really “the numbers” to be tracking.  

As a business owner which numbers to track can be confusing.  One reason it gets confusing is because the numbers your banker or accountant may be concerned about tracking may not the ones that ultimately influence your business’s performance.   Most business owners have been conditioned to look backward more than forward when it comes to tracking numbers, because those are the numbers the “outside players” put so much emphasis on.   Think about it….you can’t apply for a business loan and submit your tax return and financial statements for NEXT year!

The numbers you pull off your financial statements are great for seeing trends and comparing historical data.  And, depending on the power of your business system, in addition to the cumulative numbers, there are countless ratios one can track and monitor.   Additionally, there are a lot of industries that have captured years of peer data so it’s very easy to see how your company compares to others in your space.  There is no shortage of data.

All of this is important, these numbers are excellent indicators of the current financial health of the business.  But as a predictor of success or growth, they only cast a reflective light on how the company is going to do this next quarter, next year, or beyond.  Why? Because you’re solely relying on historical data to predict the future trajectory of the business. 

But what about predicting success? Predicting growth?

What numbers should you track that are going to increase the likelihood of success in your business?     First, you may need to define what success means for your business.  In most cases, its profitability as a minimum and usually some desired amount of growth.   Once defined, are the best indicators of achieving it going to come from looking backwards or forwards?  The challenge is we’ve been conditioned to track numbers looking backward (financials, tax returns, etc.), but that only tells us 100% what has happened, it doesn’t project the future.  You want to project or create your future (or at least the probability of it).

The simplest way to get your mind around this is to start thinking about actions and behaviors required in the future to achieve your desired outcome.  Once you start thinking that way you will find you’re looking at results more to see how you did verses what actions you need to be taking. 

We’re essentially talking about KPI’s (Key Performance Indicators) but too often companies are tracking KPI’s that are nothing more than data of what has already happened.   Challenge your team to think of them as “Key Predicting Influencers” instead.  The objective is to drive future actions and behaviors.

Every business has opportunities to track numbers that will increase their odds of having success.  Some may be easier to define, but without exception, every business has them.  

Here are a few examples to help get you started…

Sales – If the goal is $100,000 in sales.  The action is to determine the activities required to achieve that?  If it’s 5 new customers.  How many prospects do you need to contact to get a customer?   How many touch points (emails/calls/social media/meetings) are required to generate a prospect?   Now you’re getting closer to tracking a number that increases your chances of succeeding.

Mfg Plant – If the goal is 0% machine downtime.  The action is what are the activities required to increase the chances of that?  Having a preventative maintenance program?  Mandatory, checklists prior to running the equipment?  Proper staging of all required materials, tooling, before operation begins?

Employees/HR – If the goal is reducing turnover 25%.   Research indicates one of the biggest contributors of turnover is employee are disengaged at work.  The action is what are specific activities you can do to increase engagement?  Company mtg 1x/qtr?  Weekly Team mtgs?  Annual Company Surveys?  

It doesn’t have to be complicated.  Just be sure to ask enough questions that you’re getting to the real driver of the end result you are trying to achieve.  (Fair warning) In doing this exercise, 99% of the time when companies start defining these, they don’t dig deep enough on the actions or behaviors they are going to measure.  Don’t be afraid to peel another layer off the onion as you define these Key Predicting Influencers

What about your business?  Are you tracking KPI’s that are more about the past or the future?  Are they action oriented?  Are you sure?  Are they related to expected behaviors?   As always, we value your comments in the space below.  

Chris Steinlage Kansas City Business Coach