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12 months & 20 business plans later: How this simple activity separates the strong from the weak

What we learnt about small business from spending 12 months writing 20 business plans.  The key to keeping your business, in business, could be as simple as tracking three or four key numbers every single day.

Owning your financials

Maybe eight years ago, while I was in between selling out of one business and starting up WORK[etc], I spent a year writing business plans for other businesses. It was part of a pseudo-government initiative where a small business could hire a consultant to work with them to produce a business plan and then claim 50% of the cost back as a grant.

Over the course of that year I got heavily involved with maybe 20 businesses covering the full range of industries — from a bio-tech team working out of a local university who was looking to commercialize sleep monitoring technology, all the way through to a 30-year-old, family-run mechanical engineering company struggling to stay competitive against cheaper off-shore producers.

I worked with the owner of a marketing company that had expanded nationally too quickly and was facing the harsh reality of having to close down offices just to survive. I worked with an amazing building technology company that had patented a strong and realistic metallic paint that could be applied to any surface to give it not only the look but also the touch and solid feel of metal, just without the actual weight of metal.

In hindsight, the year working at a strategic level across so many business was more valuable than the three years I spent earning a University degree.

The point of sharing this story is that much like Stacy Kildal’s blog post, after a while you start to spot the same patterns emerge time and time again. The businesses that are struggling share a very similar set of challenges and the businesses that are powering along share a common set of systems and practices.

The worst offenders were those business owners or managers that just did not understand how they actually made money; that is basic financial literacy. Typically the research interview I’d do would go like this:

Daniel: So, how is Widget Corp tracking this year?

Owner: Yeah, really well. We’ve got a big new contract to make Blue Widgets and I’m really excited about presenting at Widget International 2006 next week.

Daniel: Wow, that sounds great. And are you turning a profit this year?

Owner: I think so, but you should speak to our accountant.

Daniel: OK, so tell me about these Blue Widgets. How much is the contract worth?

Owner: Its a huge contract, one million dollars for an initial order of 5000 Blue Widgets

Daniel: Great. So how much money will you make on each widget?

Owner: Hmmm, I’m not sure, you’d have to speak to our accountant.

Daniel: Ok, I’ll definitely do that. So do you think you made a profit selling Red Widgets last month?

Owner: We must have, I mean the bank balance went up. But really I leave all that financial stuff to our accountant.

Daniel: Ok, and which office is your accountant in?

Owner: Oh, she doesn’t work here. She’s part of Big Accounting Corp in the city

Well, you get the idea. And it wasn’t always left to the accountant. Sometimes it was the financial controller, the bookkeeper, the general manager — even a wife or husband. I was once even sent to talk to Jenny at the front desk who had done a course on Xero.

These owners and managers were all smart and talented people, so it wasn’t a case of not having the intelligence to understand cash flows. Rather, they chose to maintain an attitude of “that financial stuff is not my thing” or “I don’t have time to look at all the financials”. Instead of taking responsibility for knowing the financial health of their business, they place all their faith in some vague accounting higher power that would magically sort itself out at the end of the financial year.

Hopefully everyone reading this post is nodding their heads right now. You’re either nodding because you’ve seen this in your own clients, or you’re nodding because I’ve just held a mirror up to you.

What I’ve come to learn is that this doesn’t have to be a huge big thing, especially if you’re not naturally numerically minded. In many — if not all — businesses, success often comes down to a few simple metrics that you need to monitor every day, week, month, and quarter.

For example, with WORK[etc] — the business — I’ve been keeping a daily record of the count of site visitors, number of free trials, dollar sales of new customers, and dollar sales renewals e-v-e-r-y s-i-n-g-l-e day for the last 5 years. Looking at the spreadsheet now I can see I’ve missed exactly 32 days out of more than 1825 days.

The reason I track these metrics? Firstly, these are the numbers that drive my particular business. Site visitors turn into trials, trials turn into new customers, new customers turn into long-term customers.

Secondly, these numbers don’t lie and although they don’t tell the whole story, they are enough to clearly highlight trends week to week, month to month.

Finally, I can collate these numbers entirely on my own. I’m not waiting on anyone else to pull a report or send an email. These are my numbers; I own them (and they kind of own me too).

Our simple daily KPI report, sometime circa 2010

Our simple daily KPI report, sometime circa 2010

So how do you set up your own Core Metrics?

Communication is key when dealing with whoever “looks after all that financial stuff” for you. Explain that you want to create a top-level, simple metric that you can track day in and day out. It might be as simple as knowing the profit per widget and how many widgets were shipped yesterday. Or it might be knowing your staff’s average utilization rate and how many client hours were recorded on timesheets yesterday. Of course, you can do all this in WORK[etc] already, but you want to get a financial expert’s advice on what to actually be tracking.

CMA and author Michael Di Lauro recommends another important step in the communication process: get on the same wavelength as your accountant. If you don’t have a solid accounting background yourself, chances are you won’t be familiar with technical bookkeeper jargon. If so, don’t hesitate to ask them to use plain English to explain things. As Di Lauro says, “Translating all that techno-talk into language you understand should be part of the package.”

Put another way, never be afraid to simply say, “I don’t quite follow this, can you explain it in another way for me”. Keep asking this question until you arrive at a very simple metric.

Whether you’re reporting or financial or non-financial data, an all-in-one CRM can make things easier by collating information across all activities in your business, in the single online interface. As long as the data is in the system, you can generate a report with a few clicks. Native integration with accounting software like QuickBooks and Xero will also make sharing and collaborating on your financials an easier  task.

Once you’re set up with your simple tracking report, make it part of your daily habit. For me this is literally four minutes’ work when I sit down with the first coffee of the morning.

  • Michael

    Daniel, I have to admit this is a different take on the power of Work[etc] that I had not considered. While I am not the ultimate decision maker, CEO or President, nor am I the accountant, bookkeeper or anything else strictly financial – I do have influence and being able to take hard data about something I feel but only have anecdotal evidence is quite powerful. You have given me a new way to think about some of reporting we do or don’t do – yet. Great post – thanks!!!

    • “I have to admit this is a different take on the power of Work[etc] that I had not considered”

      Yes, we need to start putting together a “business hackers guide to WORK[etc]” as literally there are hundreds of these ideas and strategies that the app facilitates.

  • This was a highly thought provoking read. It’s amazing how often the “data” of it all is set aside while we attend to “more important matters.” Being a marketer has taught me a deep respect for the data. You simply can not know what is, or is not, working unless you look at the metrics. They are the most valuable and under utilized tools a business has. I love the comment you made about the 3 years of university teaching you less than 1 year of being in the trenches. Amazing how that works! Thanks for the great blog!

    • ” Being a marketer has taught me a deep respect for the data.”

      More customer insight and marketing data is actually something that is on the books for future releases – pulling together insight from your end-customers use of the customer portal, through to email click-throughs on sent messages.

      • You can not even know how happy this makes me! I am a number cruncher at heart so this is music to my ears!

  • David Jones

    I’m notorious for telling people that I love data. The toughest decisions are often the ones you have to make with your gut because you dont have sufficient data. Take something as simple as lunch for instance. People will congregate outside the office trying to decide where to eat for lunch but I bet if they had a report of all the restaurants, their location in proximity, specials, food ratings, and prices, the decision would be easier because it would be based on data and not feeling. WorkEtc puts all our customer specific data in one place and greatly improves our ability to focus in on the health of each account. Great product.

    • “…the decision would be easier because it would be based on data and not feeling.”

      Except when you know you really just feel like pizza and everyone else wants salad … sometimes all the data in the world won’t change minds!

      • David Jones

        Very astute point!

  • Thomas Lawler

    I must admit that from my background / educational experience data is “king”. From an intellectual perspective, you can only prove arguments / theories with founded data, based on experience or experiments.

    I always envy people who have such meticulous organization & compilation of their business data, almost like I envy people who have an organized desk or apartment. With tools like Work[etc.] it makes it more possible to do your everyday tasks, complete them, and have the data or reports waiting for your observation.

    • “I always envy people who have such meticulous organization & compilation of their business data”

      Trust me I’m normally incredibly disorganized and my work days unstructured and much at the mercy of random events. The only way I could make this process work for me was a) make the data super easy to get and b) make the action part of my “first thing in the morning” routine.

  • Jason Royals

    There are a few superb points to take from this article. Quality and effective communication. The ability to generate data in one quick, easy, and cost effective solution. Using WORKETC you can create better business practices to maintain profitability. Using your creativeness with better communication you are then able to maximize WORKETC’s potential. Its easy to get lost in the abyss of daily chores, tasks, and people management. To forget the most simple of endeavors that create smart credible detailed analysis. With this CRM solution and dissection of critical data in a timely manner you can increase fundamental responsibility and business growth.

  • mbwahli

    This article is spot on. We work with a lot of restaurants, and it’s always surprising how many owners don’t know anything about the financial side of their operations, and frankly, they don’t really care. Unfortunately, we fall into the trap every now and then, too, with our consulting firm. A relationship between Worketc. and Quickbooks has changed how we communicate by opening up channels that we didn’t realize exist. As we are learning to focus on key data in our personal companies, we are teaching our clients the importance of just taking a couple minutes a day to review and an hour or so a week, to look at their most important data points and wrap their minds around the goals and system processes for the week/month/year.

  • John Belchamber

    Thanks for this article Daniel, food for thought on areas of WORKetc I hadn’t tapped into properly.
    Funnily enough, I often talk to clients about the importance of measuring your Lead Indicators (that predict future performance) and not just Lag Indicators (that tell you what you’ve done).
    Note to self: re-read this article and explore features I haven’t tapped into you.

  • Thanks for sharing your experiences Dan. As a consultant it’s so easy to get wrapped up in the chaos of daily tasks and putting out fires that I am guilty of the above charges. This was a good reminder to get back on that “first coffee of the day” financial/lead check in. If you don’t have a good indicator right first thing in the day, it’s easy to get off track numbers wise when your treading water keeping up with everything that gets thrown at you in the day. Better to tack first thing each if needed before the storm hits.

  • David McGarry

    I think we are lucky in this respect in that our business owner is very aware of his core metrics and, in fact is using WORK[etc] to help generate the data. I guess that is because we are a pretty small business, you have to have a handle on the bottom line in order to survive. I know our boss is keen to publish data in a nice manageable fashion for our weekly staff briefs (condensed to just the fine points so that staff actually read the data 😉 ) and that he uses your tools to save *his* time over the weekend.

    • ” I know our boss is keen to publish data in a nice manageable fashion for our weekly staff briefs”

      We want to work toward automating this and allow simple metrics views on the dashboard on each users WORK[etc] account. This is a little ways off though.

  • I have a general question. Do you know of any publishing companies at which the editorial staff uses a CRM application? Doesn’t seem common based on what I’ve seen….

    • Hi Eddie – It’s an interesting idea and I believe from the trade publications that have used WORK[etc] it is always about the advertising sales team using CRM. For editorial purposes it is an interesting idea and actually probably a clever means of the publisher/owner capturing value of their journalist’s networks within the business itself.

      • But does it benefit the journalists beyond the basic “Oh, your calling Mr. Smart next week. Can you tell him I am planning to call him later in the week?” Editorial seems too complex for this kind of parsing via a CRM application.

        • I think so. If journalists are now judged by page views and shares, then they could be using tools like lead management, smartvews and email marketing to keep track of and manage the key influencers in their industry; the people they want sharing that journalists content.

  • GFZArchitects

    this is what every actual bussiness should make.But I would like here to add some new point of view. We are trying to use Worketc to manage all activity of our architecture projects (& more) along the time, What we found really hard in other crm was the ability to adapt to our requirements. Generally they are too much fitted to the products sales related activity .We have only services to sell, and here things get complicated.

    Worketc has been a revelation ! we have been really impressed from his flexibility and easy of use. Everything is under control, from the quote stage until project delivery , involving the customer from the beginning by the customer portal.

    Of course we started to plan our activity on a six months basis. Everything seems more easy why we can understand before weakness points of each project in each aspect. That’s a valuable advantage for who wants to offer quality services especially in the world of architecture and constructions

    Thanks Worketc

  • GFZArchitects

    this is what every actual bussiness should make.But I would like here to add some new point of view. We are trying to use Worketc to manage all activity of our architecture projects (& more) along the time, What we found really hard in other crm was the ability to adapt to our requirements. Generally they are too much fitted to the products sales related activity .We have only services to sell, and here things get complicated.

    Worketc has been a revelation ! we have been really impressed from his flexibility and easy of use. Everything is under control, from the quote stage until project delivery , involving the customer from the beginning by the customer portal.

    Of course we started to plan our activity on a six months basis. Everything seems more easy why we can understand before weakness points of each project in each aspect. That’s a valuable advantage for who wants to offer quality services especially in the world of architecture and constructions

    Thanks Worketc

  • William Mullane

    Great post, Dan. Our consultancy works with a lot of inventor/entrepreneurs. Many tend to get so focused on their big idea that they sometimes forget to “do the math”. As part of our practice, we ask our clients to do some back of the envelope math to demonstrate that there is a market for the idea and that it could earn a profit.

    Closer to home, we are required by our federal funding partners to track the financial impact of our work on every client we engage. Thus, a year after working with the inventor mentioned above, we would survey the inventor to see if our work had any impact in the areas of investment, cost savings, sales and employment. We created custom fields in WORKetc where our team of consultants can estimate impact going in to a project (this also helps with selling the project) and then enter actuals after surveying the client.

  • Looks great Dan, I wish i would be able to use it in my line of work.

  • Jonathan Hickman

    This actually describes me quite accurately. While I would want to be personally involved with the finances, I would feel the core product and its development pulling me away.

  • This is a must share for my small business friends thats for certain.

  • I tend to agree with Ryan below. It’s very easy to get caught up in daily activities especially since we are a smaller company. But the idea of keeping a finger on your pulse (metrics) is something you absolutely have to make time for. Not only during the life of your business, but even better before your business receives it’s first dollar. I can see how this would be an easy step to leave out of the business plan at startup. The harder part for me is spending 4 minutes on it (good job Daniel), and is probably something I need to put focus on to streamline.

    Communicating these metrics across a small company is very easy to do with Worketc. With simple things like discussions and adding the people involved in the subject matter, employee and client notification is very simple. Even as a small company communication can fall through the cracks, but tools like this really help!

  • Tabitha Mills

    Wow an inspiring article. I have had similar learnings from a few key places but I found a lot of snake oil salesman as well. It’s good to see that I am not the only one out there and it is great that I have access to a community such as this for progressing my business through shared experience.

  • Branden

    I think the opposite can be true as well. Sometimes you, as the business owner, can try to deal with the minutiae of the accounting and neglect the parts of the business you should be dealing with. It’s not a bad thing to delegate, you just need to make sure you’re delegating to the right person!

  • It’s really impressive experience. I wish I cloud be so disciplined and fill in useful metric data about finance. I admin I don’t use full potential of Worketc (especially regarding financial data) This post inspire me to create strategy for my Non profit organisation and use all options in Worketc.

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