Numbers Bring Understanding

Accounting is a scary subject for most business people. For those of us involved in the trade this is easy to forget. We've come to understand accounting as the language of business and its use opens up a world of understanding and insight we find invaluable in helping clients diagnose and fix problems. At it's heart accounting is simply measurement. It's counting, plain and simple.

Measurement is a wonderful thing. It defines hard edges. It facilitates judgement. It helps us make decisions. I was reminded of this recently during a casual conversation with a client. Trying to understand more about her business I was asking some questions about her ideal customer. As part of one of her answers she volunteered that her clients spent somewhere between $3,000 and $10,000 per month on her services.

All at once my perception of her business, her clients and her service offering congealed into a better, more concise and meaningful picture. This is the power of numbers. This is the power of measurement.

When business owners set goals and finalize their quarterly, annual or strategic plans I encourage them to add lots of numbers to those plans. When you plan don't let yourself off the hook with warm fuzzy, soft-edged targets. Make them concrete with numbers. Here are some questions and ideas to help you do just that.

How many new customers do you want over the next 12 months?
How many customers do you expect to lose through natural attrition, death, relocation and other factors beyond your control during that same time?
How much do you want your customers to spend with you on an average sale?
How many times do you want them to buy from you during the year?

These are not "rocket science" type questions but the answers are rarely available to business owners when first asked. It takes some thinking and some research to come up with good, numbers focused targets and goals. And it takes a good information system to measure progress. More on that next time.