Growing Your Business Using Steel Beam Construction

I recently met a business owner, Gary, who blew me away with his point of view on the importance of goals and metrics: he believed in them! In fact, he even went so far as to say that his business wouldn't survive without them!  

If you have spent any portion of your career in a mid to large sized company, you may not be as impressed as I was with Gary’s point of view. Goals and metrics are foundational business tools for larger companies and your experience is likely that they played a part in most everything the company did. You have almost certainly come to expect a planning season and regular metrics updates. But the entrepreneur is often a different breed.  

As a coach to independent business owners, one of the most challenging topics I address with my clients is the need for relevant goals and metrics. Sure they have broad goals: they want to grow their business, they want to earn more this year than they did last year, and they want the business to create value. Ideally, they want that value to be high enough that selling would make a significant contribution to their retirement fund or allow the business to become a self-standing legacy. This list of goals is then often evaluated at a high level, such as “are we better off this year than last year?” or for early stage companies, “is there enough cash at the end of the month to pay the bills?” The concept of establishing concrete and specific goals and measures is often skirted or actively avoided.  

In order to achieve their “big dreams,” entrepreneurs need hard metrics to chart their progress along the way. The savvy business owner I referenced earlier told me that when he first embraced the idea of metrics in his business, he introduced 100 of them. Not a typo! In retrospect he admits that he went overboard but that in doing so he learned a very valuable lesson. With 100 metrics he was measuring everything, which at the time he believed allowed him to manage everything that was happening in his business. His ah-ha moment was when he realized that looking at everything was preventing him from focusing on the most important things.

Identifying the right metrics for a business can be a difficult exercise, often leading to default, common measures like revenue or net income. The problem is that these measures are after-the-fact, trailing indicators. More useful metrics are predictive in nature. For example, consider a dentist who defines success based on revenue growth and uses the revenue itself as their only metric. By the time the revenue has grown, or failed to grow, it is already too late to influence the outcome! Tracking chair utilization or the frequency of scheduling the next patient appointment during the current visit can provide early warnings of a potential revenue shortfall. Looking at other industries, a payment processing business could use a volume indicator to determine when they need to add the next employee and a business that is concerned about sales effectiveness could measure lead generation or conversion rates. The list goes on.  

It is an art to determine which measures most effectively predict the results you are tracking but what is certain is that there should only be a few of them. When you find the right metrics, you can trust they will lead you to the desired business outcome. Gary describes the benefit of this shift as being similar to the transition from wood to steel in building construction. Prior to the late 1800’s, when buildings were held up by wooden support beams, multi-story buildings were possible but the maximum height was limited. With the introduction of steel beam construction in the late 1800’s, far heavier structures could be supported and building heights began to soar. 

For business owners trying to build value, “bigger” is better but when all you have is wood, “bigger” buildings end up like the parthenon - sprawling and low. If the overall goal is to create something 50 stories tall, no number of additional wooden columns is going to get you there. In Gary’s case, trying to grow his business by tracking 100 metrics meant assessing every detail of every element of his business. Tracking all of these variables meant that none stood out and he was left with reduced bandwidth for action, even if the 100 metrics indicated that action was required. He simply wasn’t seeing the accelerated growth that he was targeting.

Gary reports that his ah-ha moment led him to switch to 5 metrics from the original 100 and he realized two significant, immediate improvements as a result of this move. First, the business is growing faster because he is focusing on the right areas. Second, and perhaps unexpectedly, he now has more balance in his life. By zeroing in on the most important metrics and viewing the rest as supporting materials, Gary is able to drive the growth of his business at a more rapid pace. In fact, he reported his recent quarter returned the same sales as all of the previous year! Stronger tools produce better results. When you identify the critical measures that drive sales and growth in your business, and measure progress against them, growth is accelerated and you are less likely to be distracted by “nice to have” or less impactful activities. 

Gary’s 100 metrics, or wooden beams, guided his early success, but his five metrics, the steel beams of his business, have given him the focus he needs to accelerate his growth.