In my previous post, I detailed two critical kinds of business metrics that will help you keep your business healthy. In broad terms, you need to focus on both internal metrics and industry benchmarks. But what specifically do you need to focus on with these two broad categories?
That’s the big question for small business owners, and it’s leads me to the five reasons why you’re probably struggling with business metrics:
1. You don’t know where to look. The reason you go to a doctor when you’re feeling sick is that the doctor has a complete knowledge and understanding of our bodies. They know where to look, and what data points to keep in mind. Many business owners are not financial gurus, and they rely on specialists (accountants for taxes) only for specific areas. Most lack the corporate finance training to see the big picture.
2. You mistake “symptoms” for “disease”. When your business is failing, you’ll likely see symptoms of the problems, but you won’t know where to look for the business metrics that indicate the underlying cause.
3. You have data, but it’s in silos. Your organization may have various departments that do a good job of tracking data. However, you lack a system that integrates all these data points in to a comprehensive, big picture.
4. You’re not willing to probe. While it’s essential that you work with someone who understands what financials to look for, you must also embark on this journey with the attitude that you’ll leave no stone unturned. You must be willing to probe within every aspect of operations, and demand that they be tied into the big financial picture and your vision.
5. You don’t feel like you have the resources to overcome the problems. Many big companies rely on expensive IT solutions and general consultants. You need research and development resources, and specific financial experts to generate the kind of business metrics we’re talking about in this post. But small businesses don’t investigate small-scale solutions, and even if they find a good solution, they don’t understand how to cost-justify the purchase.
These are all tough issues to overcome, but for the small business owner, you simply won’t find success until you tackle them. The days of making money simply by hanging an “Open For Business” sign on your front-door are over.
Every decision you make is critical, and if they’re not backed by the right business metrics, you’ll find yourself in a business death spiral. You’ll be slow to react to new developments, and your operation will slip further and further from your grip. Take hold of your financials, and you take hold of your future.
Photo by: Dell's Official Flickr Page
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