SUCCESS STRATEGIES: Measuring Up To Success!

By John Ellsworth

SUCCESS STRATEGIES: Measuring Up To Success!

 

Recently, I was introduced to a concept by my Business Coach Dan Sullivan that I believe is very applicable to any business today. He stated:

“If you measure something, you can understand it.

If you understand something, you can control it.

If you can control something, you can improve it.”

Wow! It sounds so simple, but let’s explore this quote more deeply. We all know that it is important to take measure of many facets of your business operations. Yet, many of us, in spite of knowing this is true, still don’t do it. I am not certain why many people resist doing this, but, frankly, it’s the best way I know to make financial improvements. For this reason, I have spent years putting together measurements of my Clients’ business results. By the time you read this article, they will be available at www.success-strategies.com. Please allow me to provide you with several examples:

As a follow-up to completing Annual Cash Flow Budgets for my Clients each year, I also track their Actual vs. Budget results every month. Obviously, this is the measurement part. Understanding this information comes from the analysis we do whenever an item is “highlighted” for being more than 5% over our budget. One of my Clients calls these her “Amber Alerts,” because they point out the areas we need to focus on improving or, at a minimum, grasp a better understanding of why these items are over budget. Sometimes these cost over-runs are out of our control, but 95% of the time they can be corrected. Just understanding what is going on within your business financially will provide you with an opportunity to control it, and, clearly, if you can control an item, you can also improve it, thereby boosting your cash flow results.

My Management Team Meetings with Clients also measure their results compared to six months and 12 months ago. On a dairy operation, these are items such as Milk Production (& ECM) per cow per day, their Pregnancy Rate, Heat Detection Rate, Percent of the herd that is pregnant and many other items. These are the measurements. We can grasp a better understanding of these simply because we measured them vs. prior periods’ results. If we understand these items, we can explore why they are getting better or worse and gain better control over our outcomes. As I said before, if we can control something, we can then improve it. With each of the above measurements, they clearly impact profits.

I also work with some Clients outside the dairy industry who have fairly labor intensive businesses. In their case, because they can automate some tasks rather quickly, we measure their cash flow results, not only vs. their budget, but also on a “per hour billed” basis. Completing these measurements helps us understand what the results are, but also gives us a grasp of the trends in our expenses per hour billed. Once we understand these items, we can take steps to better control their inputs and bottom line, allowing us to also improve their results.

Remember, the key to increasing your profitability is really getting inside the financial & managerial numbers of your operation. If you take time each month to do this, you’ll be better equipped to make the positive financial improvements you want to achieve! Q

John Ellsworth is a business and financial consultant at www.success-strategies.com.  He can be reached at 209.888.8960

 

SUCCESS STRATEGIES: Measuring Up To Success!

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