Spending the next few hours drilling into the business we discovered some really basic scenarios that had been the cause of the downturn in the business from the best to the worse. We needed to validate this, but my experience was pointing us in one direction.
Now, this business had been with me a while, so their structure was spot on with key account-able and response-able people in the right places.
They had the right willingness and the correct skill for this level of turnover required.
But they were blind.
They were making decisions based on poor or little information. Going back to my kids’ Parents Evening example, they were doing the ‘lovely girl’ and ‘is wonderful’ measuring of the business.
As useful as a chocolate teapot.
Yes, they were measuring stuff, but not looking at it, and saying what was the result.
One example was: ‘Well we have started visiting existing customers to build relationships with them’ – great was my response, but what was the outcome?
After looking at each other we discovered zilch, diddly squat. No additional income.
Now I am not saying their strategy is wrong, but to NOT measure it is foolish in the extreme.
By the time I left; together we had listed around eight measures they NEEDED to know, and they set to work getting the data and turning it into information to understand what was really going on.
The following day they sent me the data with a big smiley as they had discovered what their business was really like, what worked and what didn’t. Where their money was being wasted, where their time was being wasted. What customers do actually visit and what customers to say farewell to.
As said earlier, ALL the information was already there but they were asking the wrong, or in some cases, no questions to actually discover what they needed to do.
I rarely meet a business that has the answers to the right questions, they have answers because they tell me they are booked x training or reading y book or have signed up for z course and when I ask them ‘Why?’ I just get the response, ‘because somebody said it was good’ or ‘ I think we need to do this’ or the classic, ‘I hope this will be the answer’.
If they had only asked the right questions they would KNOW what to do next.
Do you want to know the right questions?
Think of those roles in your business: Sales, Marketing, Delivery, Finance, Services, HR, Technology….
Each one of these needs to work in harmony with each other as they are inextricably linked.
At Nigel Botterill’s Mastermind Summit I introduced a simple system that I call the 7-1. It basically links the business together to help everybody understand what needs to happen.
It starts backwards with:
7 – EBIT (profit before tax and interest)
6 – Operational Costs (fixed costs)
5 – Salaries (non-productive staff)
4 – Gross Margin Value / Gross Margin Percentage
3 – Revenue Required (to meet the gross margin value)
2 – Average Order Value
1 – Quantity of products or services required for sale
If – and only if – you know all these numbers can you then start to ask the right questions to get the right answers.
Your accountant/bookkeeper should be able to get these for you (or drop me a message for help).
These are the first level key levers in your business that dictate whether you will have a bad, good or exceptional month.
Not knowing these is not an option…. You need Alerts in your business to indicate something WILL go wrong and Alarms to let you know it has.
What’s your business telling you?