Axiom CPA, P.A. - Axiom CPA Blog

Earlier today I was working on some continuing education materials produced by Ron Rael. He proposed this simple test to determine whether business owners are measuring what matters.

Imagine that you are the Howard Hughes (owner) of your company and can access just one piece of information on a regular (hourly, daily, weekly, monthly) basis. This one data point will only tell you whether your firm is succeeding or not; it will not tell you to what degree. Get ready to write down what you need to know, but before you do... the information you receive cannot be

Sales or revenues.

Margins, of any kind.

Profits.

Cash flows.

Answer quickly: What information must you have to know if your firm is being successful?

What does this information tell you? Why did you select it?

Do you measure and include this in your regular daily, weekly, or monthly reporting?

I encourage all of my clients to build a scorecard that captures critical financial and non-financial information about their business. Scorecards should be concise and incisive, but businesses tend to rely too heavily on financial numbers and metrics. The Howard Hughes test cuts to the chase and forces business owners to unearth the success drivers of their business as well as the success indicators. I like it!