A small business owner wears many hats. They have to. Most who start businesses are simply technicians. This means they know how to produce a product or perform a service, but they have never been trained to actually run a business. The skill to produce something or perform a service does not set one up to be a leader, an administrator or a manager. A typical weakness of most business owners is they are often quite lacking in knowing the business’ financial numbers or other key measurements. Because of their limited time, it is critical that the owner measure the right things. The right things are those measurements that drive behaviors. By this I mean that if knowledge of a particular measurement will cause you take specific action to fix it, it is likely a worthwhile measurement.
Here is an example of this principle at work: A restaurant owner should know their average ticket. This is the average bill each customer pays per visit. If sales on a given day were $7,000 and the number of tables (tickets) was 200, the average ticket is $35 ($7,000/200). If a restaurant in month 1 has an average ticket of $35, in month two it is $33 and in month 3 it is $30, something is happening. Sales may not be down over this same period if the volume of customers increases. If you don’t measure average ticket, you don’t realize that, however. Armed with that knowledge the owner can now look to the right causes of what may truly be a problem, but one that doesn’t reveal itself by simply looking at sales figures. Perhaps servers are not actively selling desserts, drinks and other add-on items which enhance the profitability of the restaurant significantly. Could be that a coupon was being used to bring in new customers so the drop in average ticket was expected.
Figuring out what are the right measurements to pay attention to isn’t easy, but you do need to figure out those few key measurements that cause an owner/manager to take appropriate action. Otherwise you may be missing opportunities to keep your business humming.