“Count Your Chickens” and Other Sage Advice about Numbers That Every Business Owner Should Know –
Here’s a big question I want you to ask yourself. If your business was in trouble, would you know it? If you were the pilot and your company was the airplane you are responsible for flying to your destination, does it matter if you know exactly what course you are on?
What if a storm came in suddenly? Or you suddenly found yourself running out of fuel, but were nowhere near a landing strip? In business and economic terms, you could be coasting along, thinking everything is great, but can you survive a sudden downturn in the economy? A slightly-off-course way of operating may not be discernable to the business owner who is checking their gut instead of their numbers. Staying the course is not only critical for a captain of an airplane, it is every business owner’s responsibility.
One of my childhood dreams was to learn how to fly an airplane, and I did in fact earn my pilot’s license at age twenty-one. Here is a story about the day of my most important lesson during the time I was learning to fly.
It was a Saturday morning and it was storming. I was enjoying the luxury of a no-alarm clock day, sleeping in, and ignoring the thunder that occasionally woke me. Then the phone rang.
“Hey, David. Get yourself out here. We’re going flying.”
“Gary, are you kidding me?” My flight instructor, Gary, did sometimes have a strange sense of humor.
He told me no, he was not joking. “David, I’m going to save your life today,” he said.
It was ingrained in me to listen to my teachers, especially the man who was helping me achieve my greatest dream, so I got out of bed, got dressed, and headed to the small airport.
Wind, pine needles and rain pelted my windshield. But when I finally got to the hangar, Gary was already there and the plane was ready to go.
The wind and rain had slacked considerably, and we ran out to the plane. I prepared for take-off, though the full, heavy cloud cover could not have been more than one thousand feet above the runway. It was not long before I could not see those clouds because we were part of them. Looking out of the small two-seater Cessna 152, I could not even see my wingtip.
We buckled our seatbelts even tighter, and continued to climb until Gary instructed me to level off, saying that we are at three-thousand feet. The cloud cover remained a solid wall of white.
I gently steered the plane to the right, to counter what I felt was the plane’s steady veer to the left. But the wind that was pushing us to the left did not let up, so I continued to correct to the right. All of a sudden, Gary, who had been silent, yelled at me above the roar of the plane’s engine.
“Hey, David. Are you ready to die?”
My mind jumped to a context where that question would prompt my own statement of faith—so I said, “Yes.” I meant, of course, that I was right with God, and would accept all things in His timing. I started to affirm that Jesus was my—he cut me off.
“Well, you’re about to! Look at your instruments! We are going down!” Doesn’t this sound like John F. Kennedy Jr.’s plane crash? I was about to die the same way he did!
As Gary’s meaning started to hit me, I saw his arm in my view, pointing to the instrument panel of the plane. “Look!” Gary said again.
With my eyes now fixed on the instruments, I guided the plane to recover a safe and level flight path. We didn’t die, after all.
By Gary letting me go as far into my mistake as possible without a disastrous outcome, he allowed me to experience a powerful lesson I have never forgotten. “Never rely on your gut feelings,” he told me. “When you are flying, you must look at your indicators and go by the numbers.”
Years later, that lesson came to me as a key to how to run my business. It was critical for me to figure out what my key indicators were and put in place “instruments” to inform me of what was ACTUALLY occurring in my business, rather than relying what I FELT was happening.
I needed indicators to let me know if the business was up or down, drifting sideways or decelerating, on heading or off course. In business-speak, that means I had to know my numbers.
Even if my business was only slightly off course, I realized that over time, it could end up miles from my desired destination. Many business owners, myself included, are not naturally numbers and accounting-minded. And we think there are more important things to pay attention to, like customer satisfaction, marketing, and high standards of service and product quality. While it is a good idea to frequently look up from your desk and take in the state of the business as a whole, if you are not regularly checking your numbers—your key indicators—you could be headed for a big crash.
A key performance indicator (KPI) is a business metric used to evaluate factors that are crucial to the success of an organization. KPIs differ per organization, and it is your job to determine which are critical to you in your business. You want to always operate from your KFP (known financial position) and know your KPIs (key performance indicators). My instructor was right about another thing, too: he did save my life! So now, let me save the life of your business: know your numbers!
It is not unusual for a business owner to have their accounting set up and someone to follow procedures, and then the owner (more or less) forgets about it. Not smart. Pay attention to your indicators! You need to know your “gross profit” just as much as a pilot needs to know their “altitude.” Why? Because that is the information which you can use to make your next move the right move. Know this: An INFORMED decision is a BETTER decision. Even the adage about not counting your chickens before they hatch is based on the principle of KPIs!
In my book, Freedom To Succeed, you will find a template you can use to create ANY system. It makes it super easy when you use this four-step proven template that will result in saving you countless hours of time, and contributes to efficiency which translates into increased profitability.
Once you have all the basic reporting systems in place, you can add to your decision-making ability by tracking other measurable KPIs. Depending on your type of business, you can start by adding what you would find most useful. Examples include sales KPIs such as sales growth, opportunities, and product performance. In marketing, you may want to measure the results that a particular marketing campaign is generating, compared to the cost of running it.
A customer-retention KPI measures your ability to keep and generate revenue from recurring customers over the long term. As you can see, the possibilities for different KPIs are many, but not infinite. Do not make the mistake of trying to track every little detail and spend hours poring over reports. Determine which KPIs help YOU make better decisions, and put systems in place to insure you have the numbers you need when you need them. These numbers are your indicators, your gauges to help you steer your business towards success.
Did you find this article beneficial? Click here to learn more about my book, Freedom To Succeed: The Diamond Mindset and Six Systems Needed for Business Success.
Author, Freedom To Succeed: The Diamond Mindset and Six Systems Needed for Business Success
Empowering Small Business LLC
(813) 580 – 8920
Radio Talk Show Host, The Empowering Small Business Radio Show, WSRQ 106.9, 98.9 FM & 1220 AM