Martz Witty
Head of the Martz Group.
www.martz.co.nz
There’s an old adage that says assumption is the mother of all stuff ups (yes there are alternatives to this phrase), but the fundamental truth is sure. If you carry on blindly assuming everything is okay, one day you will get caught unawares.
Having blinkers on in business (or in life in general) is totally unhelpful. Blindly forging ahead with disregard to circumstance is a recipe for disaster.
I’m not suggesting for a moment that it’s not a good thing to have determination and grit – but blindly following a dream with no adequate measurements of progress (or regression) will certainly find you one day with your pants down.
So how do you know if all is well in your business or not?
Well it’s about conducting testing, measuring and monitoring. But of what? Of key performance indicators – that’s what.
These may vary from business type to business type but some fundamentals remain.
What is your breakeven turnover? That is how much must you sell in order to literally stand still in terms of cashflow and then profit (the two are different amounts!).
What are your actual sales? What is your actual gross profit? What is the sales mix? How many customers do you have? What is the average transaction value?
What about transaction frequency? Overhead expenses — are they in check with expectations and budgets?
Cashflow — what is your actual bank balance and what did you plan it to be?
What’s the gap between accounts receivable and accounts payable? How old are debtor’s days on average?
If this all sounds overwhelming, then it probably means you don’t have the appropriate KPIs (Key Performance Indicators) in place or the correct measurement of them.
This is a relatively easy fix. Some are obvious but then others might be a little more complex.
The integral part of this is the work “key”.
There might be some nice-to-know things, some want-toknow things too. But what are the ‘must-know’ things — the indicators that lead on to the critical success factors of your business.
By comparing and monitoring results (some financial, some not), you will be able to know where you are going, what you are doing right and what needs improving.
Eyes wide open. No blinkers. No sudden surprises that catch you with your pants down.
