A guest post from Fiona McKenzie at Blue Note Solutions Ltd:
When you love the service you’re providing and want to deliver the best it may seem crass to say it’s all about the ‘numbers’. But ultimately you will have no business if the numbers generated do not add up to a profit. If you find your numbers do not help you assess and manage your business that is probably because you are not receiving accurate or sufficient information!
An analogy suggested to me recently is weight control. Effective weight control would be difficult without the right numbers or rather measurements.
However if I tell you someone is 10st, that is a number, but what does it mean? Over or underweight? Well you don’t know, you need additional information such as height and if you also know sex and age you can make an even better judgement.
To begin weight control you need some idea of your weight; where you are now. So you probably need scales. Not only would you need scales but you’d need to ensure that the measurement is accurate i.e. scales are correctly calibrated. Inaccurate measurement may mean dieting unnecessarily or ineffectively – disaster!
You may have accurate scales but they may not be providing you with the most useful measure. So your weight may be generally OK but you’re accumulating a little fat around the middle. In this case the best measure may be waist size. So a tape measure and inches rather than scales and pounds.
Knowing your weight/waist size is of course only the beginning. If you feel unhappy about your weight then you will want to reduce or increase that weight. Knowing the measure you can then formulate a plan – a diet or exercise regime. Here you will need more measures such as numbers of calories, portion sizes or exercises. And then you’ll measure (weigh) again to check and adjust your progress.
So it is for your business as for weight control:
· Get accurate, appropriate and meaningful measures (numbers)
· Based on initial measures formulate an action plan (business strategy)
· Measure your actions/outputs/inputs
· Measure the result (progress)
· Adjust your plan as required to reach your target
As Brad Sugars, founder of ActionCOACH, says, “One of my main business mantras is ‘Know your Numbers’ and because numbers are the language of business, it is numbers that will ultimately determine your success!”
About the author: Fiona McKenzie is the Director of Blue Note Solutions Ltd based in Oxford. Fiona helps SMEs gain clarity and control of their financial performance. She offers a complimentary Profit Improvement Review to SMEs based around Oxford and the Thames Valley.