Are You Measuring Your Business Accurately?

John D Rockefeller knew a lot about how his business operated

Back in the late 1800’s John D Rockefeller knew a lot about how Standard Oil operated.  Rockefeller was trained as a bookkeeper, so monitoring numbers came easily to him.  One of the more famous stories from Rockefeller is about how he once asked the guys who put solder to seal barrels of oil, to try to use a couple less drops, and see if the barrels still stayed closed.   They got the quantity of drops required down from 40 to 39, making a nice cost savings while still maintaining quality.  (They found that 38 drops caused the barrels to leak, but 39 worked perfectly).  Rockefeller was able to do this because he monitored his numbers very closely.

The CPA crowd are measureres – but are you truly measuring everything you need to in your business?  The standard CPA network signs up for a license to direct track and automatically everything is tracked.  This has worked very well for many networks as they got started.  But moving forward, as the space gets even more competitive, may require even more numbers to be tracked.

So what else should you measure, and how should you measure it?

The right term is KRA”s, or “Key Result Areas”.  You should take a look at your business from a distance and think about what your key result areas are.  What are the areas of your business which truly matter?  If you run a [commodity] business like a CPA network, maybe most of your numbers are managed within your affiliate network system.  But this probably also means you don’t have any competitive advantage.  So as your business grows, you should think about what the areas are which truly reflect the running of your business.

Then once you have all these numbers collected, look for ratios.  The accounting guys are great at this, they always express critical numbers as a ratio.  An example ratio might be dollars earned/clicks.   Then, if you look at this number every day, you have a clear handle on a key number for your business.  If this ratio changes dramatically, you can easily investigate further.

Let me be clear – you don’t want to over measure.  This is not about spending 5 hours per day looking at numbers.  You should be spending 5 minutes in the morning taking a look at the previous day’s numbers.  But it must be done each and every day. If the numbers need to come from a lot of different sources you can assign the collection of the data to one of your staff.  Perhaps a lot of it can be automated by one of your techs.  But those stats need to be on your desk every morning so you can see how your business is doing.

One of my clients is a call center.  They had found their business was starting to drift, and were unclear as to why.  When I started encouraging them to cmonitor their stats daily, rather than monthly, they quickly found a couple of holes, which were easily fixed.  This has since opened up all kinds of avenues into new numbers that should be tracked, giving far more insight into the operation of their business.

As they’ve continued digging into their numbers on a daily basis, they’ve identified a couple of other key holes. Yesterday I was talking with my client and they’ve just had their best week, ever.  They are now able to bring on 15 additional people with no additional cost.  This kind of monitoring may sound simple and obvious – but are you monitoring all the key numbers for your business on a daily basis?

Another client does a pretty good job at monitoring stats.  As they were testing a viral signup process for their site, they found that they could get some dramatic improvements by monitoring their stats.  In the beginning the signup process was wildly inefficient, and a mess.  After 2 months of monitoring stats each day and improving the process based on the results, dramatic improvements have been made and it became the most efficient signup process I had ever seen – making the site capable of generating more viral traffic than most others.

So monitor your stats.. don’t go overboard, find the key measurements for your business, and monitor them every day.  Over time, the dividends will be huge.

Credits:  Inspiration for this article came from Bob Parson, the CEO of Godaddy’s blog, and Dick Costolo, the CEO of Feedburner blog.

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