Why Retail Metrics Are Crucial For Your Success
Why do retail metrics matter?
Most business owners are biased against business and retail metrics. They know they’re supposed to use the metrics. They’ve heard about phrases such as “numbers don’t lie” and “what gets measured gets done”. They have this feeling that numbers are important.
But, this feeling is only present in theory. The reason why I started this post by saying that business owners are biased against metrics is because there’s an important caveat here. Business owners know that metrics matter, but they don’t perceive them as crucial for them.
In other words, there are always other priorities they have to deal with. Another fire to put out. Another problem to fix. Who has time for collecting and analyzing numbers? This blind spot leaves many business owners clueless about why their businesses fail.
It makes it easy to fail. It’s important to understand the key reasons behind this hate against numbers. The first one is that metrics have been presented to us in the form of forced homework from a young age. As a result, most adults have a tendency to view anything number or metric-related as a chore (metrics and technology don’t have to be boring). The second, more important reason, is the fear of failure.
You might say “how is not dealing with numbers indicative of a fear of failure?” and it’s quite simple. If you don’t define what failure is, there’s a misconception that you won’t really fail. Most people and most business owners avoid defining rules for failure. Ironically, this means that they will always fail, but they won’t figure it out until it’s too late. Why? Because they’ll always lack the numbers that would give them warning signs. That are predicting the future for them. This leads to cluelessness about the health of the business.
The business owner only notices the manifestations of business conditions. Thoughts such as “I’m not sure if I can make the payroll this month” or “oh, looks like there’s some extra cash sitting in the account” are not indications. They’re a manifestation of what’s already been done. Both of these scenarios can be predicted with relative ease. If you have numbers, that is.
The reason why this is dangerous is not just because it will run your business into the ground, but also because it makes it very hard to grow. In the scenario where you don’t see the extra cash in the account, but you’re trying to grow, how do you know you’re on the right track? What will provide you with confidence that it’s OK to continue along this path, if your only metric is a binary result?
As you can see, we strongly believe that metrics are crucial for your business. This blog will explore the concept of “knowing your numbers” and tell you what numbers you should keep track of.
What kind of metrics are tracked in business?
In football and soccer, by keeping score, adjustments can be made that change the outcome of the game. Business visionaries & television personalities such as Kevin O’Leary aka “Mr. Wonderful”, Marcus Lemonis, and Jon Taffer, all have their go-to metrics. See examples below:
They get many proposals and get approached often with business ideas. The quickest way to determine if the business owner knows what he or she is doing is checking if they know their numbers.
Quite often, numbers can tell them if it’s even worth considering the company or project. Of course, sometimes the numbers won’t tell the whole story. Even then, they’re a great starting point for assessing what path the business will likely take.
If business owners could measure success, they would be able to observe their business. Then they could make critical adjustments. Accounting is a core business principle, yet so many treat it as a chore that comes once a year. Profit and Loss, also known as an income statement, helps visualize revenue, costs, and expenses. How do you go beyond the P&L status quo?
Far too many businesses don’t have any metrics to measure success. They know what it takes for businesses to generate money or lose money. They try to predict the future by asking themselves a series of business-related questions. Often they’re focused on debt or scaling the business. One of the other questions they ask is whether they help a product/service become more profitable.
This is a poor approach to have in business because it’s too vague. Not knowing your current numbers means you don’t know how you’re doing. Not having projections for the future means you won’t hit them.
Marcus Lemonis and Jon Taffer expect owners to know the income, expenses, and how much outstanding debt the business has. These numbers are mandatory for them. They should be mandatory for you, as well.
We follow a simple process for collecting, analyzing, and using data.
- Build a baseline – understand how to compile the data.
- Use the data – what did you learn?
- Brainstorm – identify and experiment with different ways to increase customer lifetime value (CLTV).
- Operating procedure – knowing how to use the data for different scenarios.
- Governance – having a strategy to maintain data standards and accuracy.
All of those values come from your balance sheet. Many owners don’t care enough about those numbers. That means if there’s a problem, they are ignorant about it, and they can’t fix the points of failure. A myth is that many businesses aren’t equipped to manage accounting records. The reality is that there are systems that can make tracking these numbers easy for any business.
Retail businesses cannot afford to not keep track of important metrics. The old excuse of “I run a small business, I can’t get data that easily” is out the window.
In today’s day and age, you’d be surprised at the tech capabilities for your business. Technology makes small businesses much more competitive. Or at least it provides the option. Many business owners don’t take advantage of it. We’re not just talking about financial metrics. We’re talking about logistics, CRM, full business automation. Click here to learn more about these options.
Technology reduces low-value work and automates it away. Why not help you and your staff focus on doing meaningful work? All while you’re receiving real-time health status of your business – through easily understandable data.
We help retail businesses achieve this. Make informed decisions, reduce your workload and drive your business in the right direction. Contact us today to learn how we can help.