Dashboards, Scorecards, Key Performance Indicators, etc., etc., etc.
Ask the savvy restaurateur, the ballpark hotdog vendor, or business manager and they will tell you the two or three key metrics that they watch to understand how business is going. Is it sales, how many dogs are sold or buns that are left? One restaurateur stated that he could know almost to the dollar the amount of sales he had by asking the hostess the wait time at 7:30 each night. He correlated wait time with average check and the number of seats in his restaurant to a sales amount. Based on his experience he would understand how the business was doing that night by asking for one Key Performance Indicator (KPI). As a business owner you must develop a few KPIs of your own that you can use to manage the business as well as communicate how well the business is doing to investors, potential investors and or acquirers.
These tools are not new – ScoreCard terminology has been around a while. Robert Kaplan had books out on his Balanced Scorecard since 1997. There are dozens of books on the subject but let me boil it down.
· You need one to run your business
· You need one to communicate and drive performance for your team
· You need on to communicate how great your company is doing to your investors and potential acquirers.
· Dashboards, scorecards, KPIs (whatever you call them) can be simple and game changing.
· They should illustrate the two – six key metrics in your business
· The Dashboard should be one and only one page!
· Use pictures or graphs as much as possible (A picture = 1,000 words)
What are the easy steps to get started? You could buy one of the dozen or so books on the topic and I do recommend that but here is what I think you should do right now (you can refine it later and should):
1. Pick the three key performance indicators for your company. Example – listings, sales $, shipments, hours billed, billable percentage
2. Gain a historical perspective – for your three KPIs go back as far as you can to dig up the historical data – if these indicators are really key this should be easy. By pulling together the historical information you establish a base on which to have judgments just like our restaurant owner did.
3. Lay out data on a single sheet of paper and carry it with you everywhere. Use this as a way to focus yourself and your team. Does buying this new machine help us sell more? Are we really billing all the hours we are supposed to or allowed to via the contract?
4. Communicate these key metrics and how the company is doing to every investor, employee, manager etc. Try to measure your results to that of your chief competitor.
These prior four steps can get you started but remember it is just a start. Use these to focus your performance and to communicate your value. A strong dashboard has helped me sell companies for a higher overall valuation and has helped me convince potential investors to invest.