Warren Buffet said “If you can’t read the scoreboard, you don’t know the score. If you don’t know the score, you can’t tell the winners from the losers.”
This is so true, but in my experience as a hospitality business consultant, very few small businesses that I come across measure their progress, and often those that do, don’t analyse their numbers in any way or use them to help when it comes to making decisions.
To assist with your business strategy and business development, you should be measuring the ‘health’ of your business in 3 different areas – finance, customer and team.
In other words, how is your business performing in each of these areas? e.g.
Is your business profitable?
How does performance compare against last year?
What do your customers think about the service you are providing?
Is it what they want?
How engaged are your team?
How is your retention of staff?
If you are tracking numbers, which numbers are you tracking? Are you measuring both KPI’s (key performance indicators) as well as critical drivers? When it comes to growing businesses, the key here is to recognise the difference between these two things.
KPI’s are telling you what has gone before, or in other words how effective your activities have been. Critical drivers tell you where you are heading.
Let me put this into the context of my business – my P&L (profit and loss) will show me what my sales, expense and profit were for any given period. Critical drivers for my business are the number of consultations I have booked at any one time, the number of 121 meetings I have booked as a result of networking and the number of talks I have booked in that I am preparing to give.
Critical drivers are the activities or things that should be in place that bring in extra sales. In the hospitality business these might be things such as number of joint ventures with neighbouring businesses, number of networking events held in your venue, and retention of staff.