March 17, 2016

How to Become Fluent in the Language of Your Business

If you own a business, you understand that it’s like a living, breathing organism. In the early stages, it’s just like an infant, subject to growing pains, sickness, need of nourishment, and discipline. As it grows, it will take on its own personality, have a mid-life crises, and possibly need to reinvent itself. All along the way, it’s speaking to you. But do you speak its language? If you don't have a grasp on your company's KPIs, then you can't hear what it has to say!!

My wife and I have a new baby. She is our first girl and of course, daddy was wrapped around her little finger at first sight. As good of a baby as she is, sometimes she cries for no apparent reason. We offer her food, comfort, a clean diaper, but sometimes to no avail. As my wife and I take turns bouncing and coddling her, we often think, “if only she could just tell us what she needs.” But she’s a baby and babies . . . don’t talk.

Do you ever feel this way about your business? Like it’s begging for attention, but you have no idea where to start or what it needs, and you wish it could just tell you? Well, the good news is that your business can talk to you and tell you what it needs. You just need to speak the language.

Every business has metrics, some businesses just track and analyze their numbers better. If you’re paying attention to your metrics, it’s amazing to hear how much your business has to say.

Your business speaks in metrics - Click to Tweet.

It all starts with identifying your KPIs or Key Performance Indicators. Here are a few common KPIs:

  • Marketing Team: # of Leads Generated
  • Sales Team: % Converted from Lead to Patient/Customer
  • Front Desk/Customer Relations: % Kept Appointments/Return Purchases
  • Production Team: Total Production
  • Financial Team: % Production Collected
  • Executive Team: Profit/Overhead Ratio

Think of your company’s KPIs as its vital signs; they give you a quick assessment of the overall health of your company — Click to Tweet

A quick glance at your KPIs will tell you how healthy your business is or where it needs attention; if one of your KPIs is weak, then you understand where the potential problem is and can begin providing the needed attention. An experienced business owner will know what each one of these products are on a weekly/monthly/quarterly basis and the “healthy” range that each should be operating in.

If one of your KPIs is struggling, would you know where to pinpoint its contributing weakness?

If you have identified the flow of metrics within each department that make up its department product (KPI), then yes, you would know where to pinpoint the problem. Each department (or team) has a natural flow of metrics that drive the KPI. Upstream metrics flow into midstream metrics which then flow into downstream metrics, also known as KPIs. Knowing the upstream and midstream metrics that flow into the KPI (downstream metric) allows you to pay attention to the performance of these contributing metrics and course-correct before the performance affects your KPI. Any sign of slipping in your upstream metrics will eventually show up in the KPI, unless you step in and course-correct. If, for whatever reason, you failed to monitor a KPI’s contributing metrics and it experiences a drop in production, knowing the upstream and midstream metrics of that KPI will allow you to investigate the cause and course-correct.

Here’s an example of how your business is talking to you:

You experience a big drop in your # of Leads Generated KPI. This lets you know that there is a problem in the upstream metrics for this KPI. If you look at its upstream metrics, you might find that two weeks previous, your website traffic dramatically dropped or your team stopped asking for referrals. You then give these areas attention and begin to course-correct and remedy website traffic and referrals. As you increase production for those upstream metrics, it begins to affect your # of Leads Generated KPI.

If you wanted to prevent the drop in your KPI to begin with, monitoring its upstream metrics on a daily basis would have provided that opportunity. That is why the trick to healthy, stable KPIs, is knowing the flow of metrics within each department and monitoring their upstream metrics on a daily basis.

Since KPIs are driven by the performance of other metrics, you shouldn’t set a goal for a KPI, but establish an acceptable production range. Once you’ve set your production range for your KPI, you can work backwards to establish the necessary production ranges or goals for its contributing metrics in order to achieve the KPI’s desired performance. As you work to identify your contributing metrics, they will fall into two categories:

1. Goal-Based Metrics

The goal is set to hit daily, weekly, monthly, quarterly, or yearly expectations (typically upstream metrics, but can be midstream metrics).

2. Production Range Metrics

The range is set for production expectations and only changed as production improves (typically midstream metrics).

Contributing Business Metrics

Monitoring the contributing metrics of your KPIs, especially your upstream metrics, and having your team’s daily focus on these, gives you an undeniable amount of control of your company's health. In addition to preventing problems, monitoring upstream metrics allows you to identify causes of success and duplicate.

For instance, if your collections skyrocket, you can look upstream to your department’s contributing metrics and see where the responsible increase in production came from. A great business manager will investigate until they find out what caused the spike in production and implement systems to try and duplicate it.

Financial Key Performance Indicator KPI

If you think if your KPIs as your business’ vitals, think of upstream metics as your daily vitamins and exercise regiment. With a consistent focus on your upstream metrics, your KPIs will become stable and healthy. BlueIQ is the automated dashboard that interprets this analytical language into your native tongue. In no time, you will be fluent in the language of an expanding, thriving business.

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