Today’s business owners and managers have to meet a lot of expectations — some realistic and some not.
Among other things, they are expected to generate and interpret a lot of data — about finance, customers, competitors, operations, marketing, personnel, and whatever else is needed to survive the demands of lenders and an array of government agencies. It may not all qualify as “big data” in the corporate world but in smaller businesses, where you don’t have platoons of accounting and information specialists, all data is big data.
What makes sense in today’s business world of “analytics” can become a management problem by itself in a smaller business, and can easily get in the way of what is important — managing your product or service, your company’s health, and your team of workers.
Handful is the operative word, though. To get the data picture under control, many managers find that they have to shrink it down to business card, or “handful” size. Keep it simple and it will work for you.
On one side of your pocket-sized card you should try to include only the things that can be managed. It’s good to keep the basic financial data on the other side of the card, too, but remember that financial data mostly reflects the results of management, not what to do about it. What gets managed is what can be managed: the revenue and cost elements that add up to profit or loss.
What should be on the managing side of your pocket card? Start with sales numbers. You should know your current sales level and how it compares to the same period last year. If your business has expanded by adding new sales outlets — new stores, or Internet sales, for example — you will have to adjust your look at sales to account for this change. The standard way to do this is to look at “same store sales,” which tallies up the sales figures only for the stores that were in operation both last year and this year during the time period covered.
The idea of “same store sales” can be adapted to the kinds of businesses where revenue generation is a more appropriate measure than sales. Service businesses involving such things as computer systems design and maintenance, tax preparation, or legal services, often have more complex revenue patterns than, say, a retail sales operation, and consequently need individualized ways to present the data so that is useful to managers.
The reason for having a sales comparison in your pocket and up front in your thinking is that substantial changes invariably call for management attention and possibly action. As a good manager you never want your thinking to fall behind your sales curve.
A second number to place on your pocket data card is your current “sales per employee.” This is a number that is useful that is useful to managers in almost all businesses. It is very much a controllable number and if it is declining there had better be a good reason. There are times when it reflects a deliberate strategy to grow your staff — hiring new salespersons to support an expansion of hours, for example. More often than not, though, a decline in sales or revenue per employee reflects a buildup of administrative staff. The internal dynamics of staff growth is a story in its own right, but it is clearly something that a manager must keep watch over, especially in a smaller business.
A third number for your pocket data is your overhead expense as a percent of sales, for the latest month and for the same month a year ago. Control of overhead, very much like control of administration, is one of the keys to a profitable business. You don’t have to be a scold or a modern-day incarnation of Ebenezer Scrooge to keep things under control, but you do have to pay attention and, sometimes, “sweat the details.”
The fourth indicator to keep with you should reflect the number and value of customer returns of goods for the current month and the same month last year. Businesses selling services rather than goods should keep track of customer complaints, missed deadlines, and late deliveries instead — again with numbers indicating current levels compared with a year ago.
The fifth number you keep in your pocket should be a measure of customer retention or loyalty. There are many ways to prepare these, but with today’s business data base systems you can readily prepare the one that best fits your business.
Keeping the important stuff up front in your pocket and your mind is not just one more thing to do. It will reduce your workload by helping you to be a better manager.
James McCusker is a Bothell economist, educator and small-business consultant. He can be reached at otisrep@aol.com.
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