Do you know your numbers?

In most cases, the success or failure of a business is driven by a number of critical factors. Altitude Advisory Director, Andrew Mattner explores these factors and the importance of understanding these figures.

Successful business owners understand this. They have systems that allow them to capture the data that relates to these success factors and measure it. As they say, “what can be measured, can be managed”.

Unfortunately, most business owners have little idea about the drivers of their business, let alone having a system that measures this critical information. Instead, their success or failure is driven by the state of the overall market or in most cases by sheer luck!

The right systems are imperative.

Some of these success factors are financial and some are not. They will vary depending on the type of business you operate. Regardless, your systems need to provide a mechanism to:

• Capture the key data
• Measure the key data
• Manage the key data

Before you set up a system to capture a whole lot of information, you firstly need to know what data is important. For example, a retail business may measure things such as:

• customer counts
• average sales values
• gross profit margins, and
• sales per square metre.

Whereas a manufacturing business must consider factors such as:

• the amount of rework or,
• downtime.

Capturing real time information is critical.

Once you know the drivers you must set up systems to capture the data. Having good quality financial reporting systems, that work in real time, such as Xero will assist. Getting real time information is critical and having a system that provides clear levels of responsibility for gathering data is imperative.

The importance of intelligent measurement.

Once you have the data you must measure it. Set your own targets and benchmarks based on your desired goals. Industry benchmarks can be a useful guide but why only target what everyone else does? Establish a system that clearly reports variations between actual results and target results and provides explanations as to why.

Develop a robust management system.

Finally, you must manage the information you have. Negative variances need to be investigated and remedial action taken. Positive variances need to be investigated and good results extended through further activities or enhancements. A robust system of responsibility and follow up should ensure this happens promptly.