Most people who know me know I’m not a big sports fan. I do not have a favorite team. I do not watch sports on TV. I do not necessarily know or care much about who plays for whom. What I do know, and greatly respect, is the object of the game. Why? Sports analogies offer great insight, as they are significant metaphors for the small business owner and independent sales professional.
Imagine, any one of the football players on a field not knowing what the score is or how much time is left in the game. Consider a soccer player who has no idea of the skills of the players he is playing against, or a basketball player who takes his time walking down the court, his team down by two points with one minute left to play in the game. My point is: Regardless of the sport, athletes know the score. Do you think Tiger Woods ever steps up to the tee without knowing where he stands or how best to play the hole? Athletes of every discipline are well versed in the level of skill needed and the amount of time left to play in the game. As spectators it is the very least we expect of them. It is their job to know where they stand so we can enjoy watching the best play at the top of their game.
So, why do we not carry such high standards for our own business?
The truth is most business owners are clueless about their own numbers or statistics. They could be losing business for months and not even know it. I know an employer in New Jersey whose business was being embezzled for more than 6 months before they ever realized something was happening. That should never be. As a small business owner, it is your job to know immediately when something is not right. You should know immediately if your numbers are not making sense against your averages. It is your business to know your business. If you were playing football, when would you want to know you were losing the game?
Most business owners sit down with their accountant or bookkeeper at the end of the month to review their “financials.” This is a very important process, but not what I am talking about. What I am asking you to do in addition to reviewing your financials at the end of the month, the quarter, or the year, is to determine the “one” number that is the key indicator of how your business is doing every single day.
Dave Thomas, founder of Wendy’s restaurants, discovered his number was “buns.” Thomas figured out that tracking the number of buns used every day was an indicator of what was happening in his stores at any given time. He found that the number of buns sold each day would not only show him how many sandwiches were sold, but also how many were chicken, how many were burgers, and even how many crossed the counter “bunless.” He could determine how many fries, Frosty, salads, and drinks were sold. He could determine how much condiments were used. Basically, Dave Thomas had a solid grasp of the health of his business simply by counting the number of buns used each day.
How does this work? Averages. Thomas knew that knowing the number of buns sold would allow his set of averages help him determine the rest. Let’s say 300 buns were used. Then knowing that 1 out of 10 sandwiches are sold without buns, 30% are typically chicken and 70% are burgers, he could do the math. Thomas could get to almost any number in his restaurants by simply placing his averages against the number of buns used that day. Though the number may not be exact, it got him close enough to use for planning and strategy purposes.
For instance, pretend Thomas noticed that instead of 300 buns, he sold only 260 in the month of September. What happened? By looking closer, he noticed the number of buns lost was mostly around the noon hour. They started to rise again after 3:00PM. Could it be that school was back in session? One year later, he sees the same 12% drop in the number of buns. He now knows nothing is wrong. It is a seasonal fluctuation that he can use to make more educated projections or even spark a series of after-school promotions.
It is shocking how close you can get if you know your averages. What keeps most business owners from delving into this kind of math is fear. There are so many moving parts to anyone’s business it can be mind-boggling to know where to start. Your number will directly relate to your type of business as well as to your type of personality, however, most of you can begin by finding yourself in either one of two categories.
The first category or type of personality is the truly commissioned, sales driven professional that is not operationally driven. Most sales professionals will track actual sales. What they too often neglect is delving into what actually got them there. Since the sale itself is at the end of the sales cycle, it is hard to make changes based on that number. By that point “what is done is done.” To be able to affect the outcome of your sales numbers, “your number” should be as early in the sales process as possible. Can you answer these questions for your business?
a.How many calls do you make each week?
b.How many appointments do you get from those calls?
c.How many proposals or presentations do you typically get from those appointments?
d.Do you know your closing ratio?
e.What is your revenue per product / sale of service?
f.How many clients do you lose due to businesses going out of business or personnel transfers, etc.?
g.Do you have recurring revenue streams?
Even if yours is a 20-step sales process, you want to choose the number that is as close to beginning of the process as possible. For example, if you know you need an average of 5 scheduled appointments in one week to make one sale, do you know how many calls you need to get those 5 appointments? That is where you begin.
Once you know – or at least have a good idea – of where you are starting, you can begin to determine where you are at any given point along the process. Using the same 5 appointments, if all were kept, but no sales were made, could you determine what went wrong? This is the point where you need to do a little research …
• Were there competitive specials?
• Were your presentations lousy (bad week)?
• Has the marketplace shifted?
• Was the quality of your appointments off (not the right people)?
The point is to look as deep as you can to determine what your numbers mean. Chalking it up to a “bad week” over and over again will not serve you. It can actually pull you into a downward spiral from which it is difficult to pull out.
Whatever your goal, you must continue to operate within it. Work to get the job done. In my experience, “most business people are willing to put in the hours; it is the work they are not willing to do.”
For the second category of business people – those with operational staff – the idea of following a process still holds true. However, this type of business is better suited by not following the sales process. An automotive dealership is a great example. At first glance you might think you need to count the cars on the lot. However, that number is 100% dependent on the number of sales people on the floor that day, the number of walk-ins, the number of test drives, your level of inventory, even the weather. There are too many variables involved for you to be able to gather the information you need. However, choosing a non-sales number – such as the number of service appointments – in any given month can provide you a wealth of information. It shows the number of people satisfied, or dissatisfied with your dealership in general. If your service appointments are slipping, chances are you will not be getting these “buyers” back for another car. Non sales numbers are steadier, less volatile and more apt to give you a truer reading of your situation.
There is not a single number that will tell you what is wrong, but there is a number that will tell you something is wrong.
The bottom line is this: Know the significance of your “buns.” Find a number that can become your leading indicator of the health of your business. Keeping track of that one number will indicate the movement of the rest. Although one single number may not tell you what is wrong, if you know you are losing the game in the second half of the last quarter – at least you know something has to change. Most business owners do not get that far, until it is too late in the game.