4 Questions For Every Business to Succeed
Over my 20 plus years as a business consultant I have discovered there are two ways businesses succeed. The first one is repeatable, teachable and doable in most business situations. That is to operate your business with a bias for action, backed on a solid strategy and using smart metrics. The other (which is hard to repeat, teach or execute) is gut decisions and luck. Oh there may be a good business idea or model along with that gut decision.
I'm going to focus on the data and metric based approach. There are 4 measurements , key statistics or metrics, if you prefer, that any and every business should know and monitor. These are not your standard business 101 textbook metrics. These are longer term metrics that will put your organization on the right path to growth and success.
The 4 measurements are;
#1] The Lifetime Value of a Customer?
Every business should figure this out in their original business plan. How many customers will I need to make my profit targets. The number may change as your business does. But you should know this target number and make decisions based on it. In many businesses each customer may be worth a million dollars over a lifetime. Once you know the true value of a customer, you can make appropriate decisions about how much time and money to spend on acquiring new customers.
#2] Who are your "eh" Customers?
Not all customers are created equal. Some customers are Promoters of our businesses others are One Off 'hit and run' transactional customers and yet others are somewhere in between. Ideally, but not so realistically, we would like to have a lot of Promoters or A ("eh" in Canada) customers. 'Eh' customers are larger, more profitable and often promoters of our business. Other customers may be large (or even larger) but they may not be a profitable or may not promote us or provide us with referrals.
#3] What is your "X-Factor" ?
The X factor is the metric that measures the "special sauce" in your organization. It is the one metric that measures the overall health of your business. For example, for me, the largest challenge in running my business is balancing doing work and business development. I can get so focussed on delivering services full time, I don't have the next piece of work lined up to start once the current work ends. So my X factor is the % of time each week I spend between business development, service delivery and admin. There may be other metrics that would work, but I find this one simple and easy and keeps me on track. Every business has one, and it might change from time to time too, but what ever that metric is, every business has one and it should be measured. This metric needs to be captured and reviewed regularly weekly or daily.
#4] What is your Business Plan + 1%?
Maybe this should be the first one, the other 3 are about measuring and reacting, but what is really important is to be proactive, to have a plan and a strategy. Some sort of vision on where your organization should go. I believe you need a long term vision of where you want your business to go, but more important, especially in the early years, is a one year business plan. The plan needs to be realistic and achievable. It should progress toward your vision but it needs to include: the key projects that have to get done this year. The plan needs to be measureable, doable and critical. It is important to know the steps of each plan and to calendarize them so there is a "to do" for each week. Vital in establishing the plan and the metrics is the ideal of improving things 1%. If each week your efforts improve your profits (increasing revenue or decreasing costs) by 1%, that works out to a 50% increase in your business. Are you up for the task. The challenge in the beginning is to at least look at and measure your business plan (and of course spend time on it) each week. Also remember it's the plan for the business so everyone can participate.
In Closing
These are the top 4 factors that lead to success. Nothing is a guarantee for success but I've seen organizations use these for to get more success out of their business time and time again. I'm sure that to some degree, everyone can guess at these, but to drill in to the data and really use them. It will make a difference.
BricConsulting helps businesses successful grow. Businesses leverage our knowledge and expertise to solve their business problems. We collaborate on solutions and strategy with clients providing an informed second opinion and a great creative brainstorming partner.