When you first start a business and you often are in a situation where you are short on resources; either hours/people or capital to hire or pay for hours/people. So it may seem frivolous to spend time monitoring what you are doing, because you have some much to do that hopefully generates revenue. The first few start-ups that I built had very little monitoring and metrics of activities, and despite the fact that they were all profitable they could have been much MORE profitable.

There is a famous saying that: “You can’t manage what you don’t measure.” A true phrase could not be said in the case of business. It sounds like extra work but it will actually help you reduce your workload.

What should we monitor?

Most of us immediately think of accounting when it comes to measurement and business, and while accounting is important there are other aspects of our business that we should pay attention to. One of the critical things that we must know to maximize our businesses, is “what really is working?” What types of projects are making the company the most money, what types of promotions sell the most product? What types of effort and hours spent create measurable results? If you are a service based companies, what activities lead to more customers? What type of customers stick around and tend to give the most money to the company?

If you are not framiliar with the 80/20 rule, it is time to become very good friends with it. It basically states that 80% of all your positive gains come from 20% of your efforts. That means that 20% of what you do actually makes a difference, and the other 80% is wasted time. The problem is that in most cases people don’t measure, pay attention, or realize what is the effective 20% vs what is the ineffective 80%.

What you will monitor will differ based on the company, but I would start on 5 - 6 key areas that you want the company to perform best in. If it is sales, track the effectiveness of sales efforts. If it is productivity, track how many hours is put into different tasks. See if there are tasks that are sucking up a lot of time but not producing any measurable value (too much e-mail is a classic example).

How do we measure?

The best way to start is simply build an excel spreadsheet. Identify what you want to monitor and improve on, and then pick out the variables. Spend 10 - 15 minutes every day simply tracking what had gone on throughout the day. You will start to notice trends pretty quickly, and become more aware of what is going on and what you are doing to positively / negatively effect your business.

You can leave a response, or trackback from your own site.

Tags: management, operations, production