The 3 most important numbers in your business

As a business owner, you get access to a lot of information and reports, and it can be difficult to understand how the numbers work and which data is really useful and which you should discriminate.

To achieve the financial and growth goals, you have to focus on what I call “The Business Trinity”, which refers to the three most important numbers in your business. You must monitor them every day to make sure your business is going in the right direction, and correct the path if it is not.

How to determine your Business Trinity

These three numbers are going to differ depending on your industry and your business model. They are not magic numbers that apply to everyone, because not all franchises are created as equal. It’s not the same to be in the personal care industry, in the car wash industry, or the food service industry. 

To determine the three numbers for your business, you need to take these three steps:

1. Within your business reporting, look for the numbers that have the most direct impact on the financial health and success of your business, and that you can measure. It may be a long list, perhaps of seven to 10 numbers.
2. Analyze which of these numbers you can control on a daily, weekly, monthly basis. For example, rent is something that has a tremendous impact, however, once you negotiate the price, there's nothing else you can do, and therefore, you cannot control it.
3. Now that the list has narrowed to, perhaps, five numbers, study which of them you can translate into specific actions to make a positive impact and change the business towards what you expect it to be. Eliminate those that are less actionable.

The goal of going through this process is to end up with the three numbers of your business trinity. Once you find them, you must center your attention, energy, power, and interest on them, since focus is what brings magical change to those numbers. 

Here are some examples of the most important numbers for three different industries. For the food industry, the numbers would be sales, food cost, and labor cost. But if it’s a fast-food business, the drive-thru times are relevant to increase the speed of service. Now, for the car wash industry, it could be the number of services, water costs, and payroll. If you have a gym, you should focus on its memberships and labor costs. 

Again, the trinity is composed of the three numbers that, if you look at every day, are the ones that are going to have the most influence on the success of your business, but that you can control and strategize on.

The Business Trinity in action

Just looking at these numbers won’t do the work. Doing and acting upon them is what's going to make a difference in your business. If you take the following six steps, you will see those numbers improve:

1. Determine what is the target for each of the numbers

Perhaps sales is one of your numbers, but you don't need the overall sales but the transactions, average ticket, the number of memberships, or whatever gives you revenue. Look at your revenue number, and determine what is your ideal target for that particular number.

2. Look at them every single day

You need to see these three numbers daily. I remember when I was Director of Operations for an S&P 500 company, where I had 63 units in three states under my supervision, and every day, the first thing that I did was get the numbers of each store. That made an impact because then each team could do something with that information on that day.

If you review the behavior of these metrics daily, then you'll be able to distinguish between a good number and a bad number and the trends, and then, you’ll know whether you're going in the right direction.

3. Create a report to monitor those numbers

To do the follow-up, create a daily, weekly, monthly, quarterly, and annual report. That way you can automate how you get that information. It doesn’t matter if it's reduced or limited, what’s important is that you can read it easily on a daily basis.

4. Find the actions to improve them

Now that you can compare the numbers and you know where each of them should be, you have to take action to change them. Are you going to work on the units that need the most improvement? Are you going to be rewarding and recognizing the ones that are doing the best work? Should you train people on how to affect a particular number?

5. Determine your calendar activities

Once you designed the strategies for each of the numbers, write the actions you’ll be making in your calendar. Specifically, what you are going to do today, this week, and the next one to change those trinity numbers.

6. Share those numbers with your team

You're going to talk about these numbers, ask questions about them, and follow up on them. You’ll even delegate activities to focus on them. But you can’t make the improvements alone. You’ll have to tell the whole team that these numbers are important for the business so that they can also center their efforts on bettering them.

If you not only monitor but execute your business around the three key indicators, then those numbers will improve your overall operations to help you get your business to the next level.

To learn more about the tools that can help you become a successful business owner, visit us at AmericanFrachiseAcademy.com and subscribe to our YouTube channel to see our video tips and franchisee interviews.

Reflections:

• How many numbers have a direct impact on the success of your business?
• What strategies can you design to control and improve them?
• Within the behavior of these numbers throughout the weeks, are there any patterns you can leverage? For example, a specific day where transactions increase.
• When will you execute those strategies?