Measuring in business helps you manage more profitably

Unfortunately, measuring usually means numbers and numbers often makes people run away in fear – here are some great tips to make measuring really easy, without the geek-speak, (or the fright)!


Firstly, a quick definition: “Taking standardised measurements produces metrics

so don’t get put off by the word “metrics” it is just another word for a group of numbers about the same thing created in the same way.
For example, a tailor takes your personal measurements for a new suit – the tape-measure goes around your chest, waist, hips, leg length, and what you get is your personal metrics in inches or centimeters; the numbers are just the results of taking measurements using a standard measuring system.
Measuring need not be complicated – in fact it is best when it is simple.

[box type=”tick” style=”rounded” border=”full” icon=”none”] I can’t begin to guess the number of people who over the years have started out by saying – “I’m bad at maths so I don’t measure, or read my reports, or understand my costs…..Let me tell it like I see it;
This is plainly untrue – these people are lying and I have proven them wrong, time and again.
Ok, they probably don’t intend to lie, but very, very, very few business owners are truly incapable of doing basic maths. This is because they are generally smart people and our education systems are established to instill the basics.
Therefore to my mind anyone who declares they are bad at maths have either:

– had bad teachers,
– didn’t find it interesting enough to listen
– both!

I know this to be true because every single client (and a few friends and acquaintances) that has ever said they are incapable of maths has become a personal challenge for me, and I have never once failed to improve their use of maths, measures, and metrics and thereby improve their business success; I’m talking about hundreds and hundreds of people here (not just one or two) and whilst some may have taken a little longer (usually because they were busier protesting than listening) in the end they got it AND LOVE IT.

Three tips for measuring the success of your business

Right, so now hopefully you have stopped telling yourself you are bad at maths, that is the very first, and very largest hurdle! (if not go back and re-read the last three paragraphs again!)[/box]  
Back to measuring your business made really easy – there are basically two reasons for measuring:

  • Financial Measuring – used to report ON the business (to the board, investors, media, etc.). These focus on using the past performance as the basis for predicting future performance of the business as a whole. A Good Financial Metric is one that makes accurate predictions about how Company A. will continue to perform when compared to other companies.
    Profit and profit margin are the most common examples of this type of measure – you will often hear on the news “This week Fatty Bank posted a record profit of $100 billion outstripping its competitors by 2%”
  • Management Measuring – used to report IN the business. These measures provide information that supports or instigates a decision about how to optimize the business products, people, pricing, markets etc. These focus on collecting and analysing activity information about various aspects and parts of the business.

A good business measurement is one that answers a question, or gives a result about how to drive profit or quality – it guides decisions for changing activities and behaviors.


Any measurements or results that don’t support any kind of decision making – confirm or alert you to keep or change something – are likely to be “vanity metrics” – there to make you feel good but with not much business value; or worse still just plain distracting.


[twocol_one_last]Here are three rules of thumb to easily create good measurements that will provide useful metrics – (remember metrics are the results of taking standardised measurements)

  1. Rates or ratios is better than an absolute or cumulative value. “number sold” is not nearly as useful as “% of total sales” – for example “we sold 5 blue ones” doesn’t give as much information as “60% of Sales were blue”
  2. Comparatives to other time periods, sites, or segments is better than a stand-alone number. “% of total sales” is not nearly as useful as ”% of total sales per week” OR “% of total sales per shop per week”. The key here is where you track a metric over different groups (in this example shops) over periods of time. Keep it consistent, if you set your metric as weekly track and save the data weekly so you can report the metric properly
    * TIP – don’t set a metric as weekly but then enter all your sale as 1 July for the entire month of July – the data won’t support the calculation
  3. Simplicity – simple and easy to understand; otherwise, people won’t remember it and discuss it. Check if the metric name is less than 5 words and the calculation is easily described in under 10 words.


A good make sure any measurements you take are ones that will drive profitable decisions for monitoring and changing your business – they measures need to either answer a question or give a result.[/twocol_one_last]


Review and update all your business measures – start with just a few each week until your entire reporting process is clean and clear.


Now that you have a taste of what we can do… here are some more options to improve your business profits: