by Bernadette Peters
What’s the Key Number You Rely On Daily?
In previous articles, we have explored the key performance indicators that tell us how well we are doing in our businesses. But sometimes waiting for accounting software data entry and reporting can be too late for us to make important adjustments.
Many businesses rely on key numbers they can access quickly each day to give them an idea of how they are really doing. It can take some time to figure out what that metric is, however, once you do, you are much more prepared to make smart business decisions on the fly.
Coffee Shop Looks at 3 Sales Categories
A young coffee shop and wine bar was tracking daily revenues to determine the appropriate number of staff to schedule on a shift. An early mistake they made was to staff only on the basis of revenue. They later learned that transactions were much smaller and the volume was much higher in the mornings, requiring more staff. And although revenues were much stronger in the evening, higher transactions and retail wine sales required less manpower. Now they look at three distinct categories of sales: coffee drinks, retail wine and enter orders. They can get this information on the fly through their point of sale system, which is updated instantly as transactions occur.
Management is able to understand peak volume times and days by looking at this data over an extended period of time. From this information they can understand how to better staff their operation to ensure high quality customer service experience.
Strategy Consulting Firm Drills Deeper
A typical strategy consulting firm would normally review income and expenses after services have been completed and billed. However, one firm in particular reviews several other numbers to determine how well they are doing and what adjustments to make along the way.
Jeff Pruett, CFO at ATPAC Group, previously worked as the CFO of a marketing strategy consulting company. He indicated that his former consulting company looked not only at revenue per consultant, but they also determined how to maximize a consultant’s 40 hour work week via revenue per full-time equivalent employee company wide. This allowed management to determine the ideal work force size. Jeff also reviewed how much of the consulting pool’s time was spent on billable and productive activities as opposed to “bench” time to understand how consultants are utilized and billed. He also reviewed project contribution margins as part of ongoing analysis of an in-process job to see if the job is getting in to trouble prior to its delivery and whether it’s losing margin.
What are the key daily numbers that are essential to making decisions about your business the fly?
Determining what these numbers are in your particular business might require some help from a professional, but once you do, your management team can be much better prepared to make smart pro-active business decisions. It may require measuring numerous metrics for a period of time, sometimes even two years or more, before you can figure out which metric or group of metrics are truly predictive for your business.