What are your metrics?

Posted by Tom LarsenAug 13, 2014 Marketing, Operations, Planning 0 Comment

Everything about growing your business is about scaling. It is easy to add 1 single store retail customer when you have lots of inventory of all the things you sell. It is an entirely different process to add 1 distributor or to add 1 chain store with 50 locations. Those kinds of blips can be upsetting (in a good way) to the supply chain or the cash flows and income streams. How you keep score as to what might represent a shaking of the tectonic plates is the management’s primary responsibility. To do that, you have to KNOW what represents a mild shake from a significant shake (I am a Californian after all).

To do that requires a personal matrix of checkpoints or “metrics” by which you can assess the health and size of your business. If a single event is going to add a 25% growth in revenue, that is pretty major. On the other hand, if all that action is coming only on 1 SKU, it may not be a very big deal at all.

My metrics have always been through watching bookings and inventory movement. Revenue alone does not describe a business. It’s a leveling agent, but, does not tell enough of the story. If you have multiple products in multiple categories, knowing how your supply chains work for each category and what might represent a significant shakeup in that area is key to being able to steer growth where you can most handle it. No inventory equals no revenue in consumer products.

If Ms. Big Customer is finally willing to take in your product, and she wants the thing that is most difficult to produce or provides the smallest margins to your business, you may or may not wish to entertain that business, at this time or any time. On the other hand, if you only need to make a phone call to change your supply chain from 50 every once in awhile to 500 (a ten fold increase), then taking that business, perhaps at some concession like free freight, is more than worth it.

But, if you don’t know your “metrics” on how much of that item you sell and how often and how the new cash flows will affect your needs in 45 or 75 days, you will lose sleep when the reality sets in later that you have committed to something that is risky or worse, that will compromise other customers or just plain can’t be done.

Know how much you sell of your products in pieces and in dollars and sleep better at night. Keep score through your reports on at a minimum monthly basis. Get down to granular levels periodically too. It’s quite possible that product you created that looks like it is going to be wonderful is selling 90% of the volume to just one Customer. All of a sudden that product needs help getting spread around to other Customers. Without good insight into what’s really happening, through bookings (when the order comes in), sales (when the order ships), you are pretty much piloting your ship in the fog (still in California).

Get to know your business, its costs and revenue streams better than you know your personal finances and needs. Do you know your your car or house payments? Know these and all the others inside your business and then when opportunity comes knocking, you will have exactly the right awareness to make strong decisions quickly and easily without losing any sleep over the decision. That’s how you grow.

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