In our Advanced Mentoring Group meetings, when I ask this question, the answer is usually something like “Vitals, what are you talking about?” or “Yes, my blood pressure is a little high. So what?”
According to Wikipedia: “Vital signs (often shortened to just vitals) are a group of the 4 to 6 most important signs that indicate the status of the body’s vital (life-sustaining) functions.”
Your business has “vitals” as well as your body. They are the 6 or so most vital (life-sustaining) numbers that tell you the health of your business. Some of the most critical ones, but not all, are usually found in the financials.
Sadly, my experience is that the majority of business owners only look at their “numbers” or financials at “tax time”. Even then, they often only look at how much tax they have to pay.
So what do YOU do?
You decide what are the 6 most important numbers in your business. They are often called KPIs or Key Performance Indicators. Make a regular time once a week for your admin person or bookkeeper to produce the numbers for you and then sit down and review them. We recommend you involve some other “trusted” person in that process. Someone in your business or maybe a mentor. If you are an AMG group member you get time once a month with me to review things.
What the 6 (or so) most important numbers are will vary from business to business, but common to most businesses would be these financial indicators:
- Income – by week or month and also Year To Date and compare to previous year
- Expenses – by week or month and also Year To Date and compare to previous year
- Debtors (Accounts Receivable) – look at the trend and the aging report
- Creditors (Accounts Payable) – look at the trend as well as the amount
- Aging report by client – how long have people owed you money?
- Gross Profit by product or service
- Gross Profit by customer / client / transaction
- Cash at bank – look at the trend and do a cashflow analysis to make sure you can cover debts and accrued liabilities
Then there are lots of non financial KPI’s to monitor as well. I usually get business owners to come up with a dashboard of the 5 or 6 most critical ones.
When you review these “vitals” regularly (the frequency will depend upon the business) then you will quickly pick up anything that is going out of the “norm” and then you can address it. Remember, if you can measure it, you can improve it!
Measure and track your vitals for greater SUCCESS!
If you are a business owner and want to know more about the Advanced Mentoring Group process, you can apply to attend one of our AMG group meetings free of charge including a business review of your business.