As the sun sets on summer, it’s time to go back to school.
The annual rite of going back to school had a clear sign of progress: you were going into a higher grade.
However, it’s not that clear in business. As we return from summer holidays and gear up for a busy fall season, are your business and your people advancing to a higher grade, or are they repeating last year?
The “Three Rs” can teach us lots in business to make sure we keep learning, advancing, providing more value to our customers, providing career opportunities for our employees, and increasing the valuation for shareholders.
Reading the landscape is most important for clarifying and refining your future direction.
- What are the industry trends and opportunities facing your customers? Have you asked them?
- What results can you help your best customers achieve by being proactive and thinking and acting like a consultant instead of a vendor?
- What’s on your employees’ minds and how can you help them learn and grow in their careers?
Writing is about communicating with your customers, employees, and stakeholders.
- How are you informing your customers about all the different ways you can help them achieve their goals? You know their goals, right?
- How are you communicating the clear direction of your company, your purpose and values, so you can attract and retain the best talent and the best customers?
- How are you informing your stakeholders (such as major customers, suppliers, and bankers) and shareholders about your recent accomplishments and major goals for the next year? Do you prepare an annual report or letter to shareholders?
The best part of math is that the numbers never lie. In business, and accounting, the numbers can vary depending on accounting policies, judgement, and overall accuracy in your system. Given those constraints, here are the main numbers that can help any business grow:
- What is your “Total days to cash” number that shows the timeline from when you pay your employees and suppliers until when you collect from your customer? Hint, it’s longer than you think. Therefore, you need more cash than you think. If you’re ever red-lined your line of credit, you know exactly what I mean.
- What is your sales pipeline, in terms of days or units? This is for confirmed orders. A separate pipeline can exist for prospects, but those aren’t real deals yet, so you can’t count them.
- What is your operational production speed? How many insurance policies were written yesterday (yes, daily!)? How many hours did you invoice (and that you’ll recover)? How many square feet of material did you produce or sell or install?
- What are the major ratios in your financial statements telling you? Inventory turnover. Days in accounts receivable and accounts payable? Current ratio? And most important for bankers, debt to equity ratio? If you’re busy minimizing your taxes, your hurting your debt to equity ratio and seriously restricting your ability to grow your business and your wealth.
Where to start?
- Interview your best customers to determine their future goals and how you can help.
- Interview your best employees for ideas on how to help your customers achieve their goals, and how to help your employees learn and grow, and use their natural talents at work.
- Measure your daily production, your cash position, cash in and out, your sales pipeline, and where your employees are spending their time, such as growth or fixing problems.
- Communicate the metrics daily to your executive team to focus on improving performance. Summarize this info weekly and monitor the trends.
It’s your job as leaders to continually improve performance in your people and your company so that you’re clearly advancing to the next grade.