The last two weeks I have written about the first three essential secrets to build a business that works…
To recap:
- Essential Secret Number One – You Must Have a Vision
- Essential Secret Number Two – There Are Only Four Ways to Grow a Business
- Essential Secret Number Three – You Must Have a Strategic Plan of Action
This week, I will write about…
Essential Secret Number Four – What you Measure, You Can Manage
A few weeks ago, I wrote about The Balanced Scorecard.
A few decades ago, business analysts thought the magical number of things to measure in a business was seven, plus or minus two.
Because of Business Dashboards you no longer must retain those seven essential numbers in your head.
We can expand those.
The things you choose to measure should not be more than three or four within four separate areas of your business:
- Marketing
- Operations
- Finance
- Human Resources
In other words, twelve to sixteen maximum.
The numbers you measure must have these characteristics:
- One key person is accountable for a number. Usually, this is a departmental manager.
- The number must motivate and result in a change of behavior and/or activities undertaken by a department.
- The number must be owned by the person responsible.
- The number must be tied to the performance evaluation of the person responsible for that number. They should be rewarded for positive performance.
- The activities related to the positive outcomes related to this number must not conflict with results in other departments, nor overall corporate objectives.
An Example of “What You Can Measure, You Can Manage.”
Most businesses want increased sales, yes?
One of the most leveraged ways to grow a business is to get existing customers to come back more often.
Yet, how many of you measure the actual transaction frequency of your customers?
First you must find the number.
In any given month you only need to find two numbers:
- The number of active
- The total number of sales transactions.
If you have one hundred customers actively buying and 1,000 transactions that month, your average transaction frequency is ten. (1,000/100).
To create an increase in your sales figures, you set a Target Number of eleven for Transaction Frequency.
What will you do to increase this number? What activities will you undertake?
Perhaps you implement loyalty cards, or start a weekly newsletter, or increase your awesome service levels with Team training.
With this new Target Number for Transaction Frequency of eleven, you now have something to measure the success of your efforts against.
Essential Secret Number Five – Creating a Difference
There is a saying: “when you have a niche you get rich, and when you don’t have a niche, life’s a b____!”
What a niche does is effectively eliminate the competition.
Because when you are specialized you have narrowed the market.
You can serve specific people, not a generalized amorphous mass.
Okay, so let us say you have a niche. The other key thing here is to start to differentiate your service in ways that wow people and sets you apart in interesting, memorable ways.
In most industries the inputs – the people you hire, the suppliers you deal with, and so on, are the same for everyone.
Everyone is dealing in a flat structure, and it is almost impossible to differentiate yourself on this basis.
The way to create a difference is to initiate awesome service standards.
The ones to build into your culture are little things that show you care.
For example, when we had an accounting practice in Victoria, BC, we ushered our clients into a small conference room and offered them a leather-bound menu offering them cappuccinos, organic snacks and teas from around the world. They loved it!!
We became known as the cappuccino accounting firm!
It set us apart, showed we cared, and let people know we were a high-class firm.
And it all cost extraordinarily little!
Thank you for reading…