Throwing money away in waste bin

Over the years I have found many small businesses trying to keep too many statistics and spending hours every week trying to keep them all up to date. One person I knew had more than 30 statistics for his one man show. It took him at least 5 minutes per week to measure and lodge each of those statistics. They were all accurate, but he felt like the business wasn't growing like it should be. Well, sure, he had beautiful admin and could tell me all sorts of things about his company, but with 30 statistics he was spending almost 3 hours a week doing this administration! 3 hours a week is a lot of time to be spending on this, especially if you are the only person in your business.

So I suggested he focus on the following key statistics every organisation should keep to track their expansion and predict their future expansion.

Total Clients (TC)

From my experience, Total Clients is one of the most undervalued statistics and under monitored statistics around. Total Clients is defined as the number of people who have purchased something from your business who are contactable. It can be purchasing anything you have to offer, but the key is that they must have exchanged money for something of value you are offering. This then differentiates Total Clients from one of it's sub statistics, New Contacts, as New Contacts can be increased by say giving away a free item in exchange for contact information. Total Clients is critical because it predicts the future ability of your company to expand. Each new client you gain is another person that has purchased something from you and so is much more likely to purchase from you again. Every person in your Total Clients statistic should have a file, or a record in your customer management system. Once a client has purchased something from your company, they remain in the list from then on.

Gross Sales (GS)

This is probably the statistic everyone is most familiar with. "How much did we sell last week" is a great question to ask and critical to keep on the rise. Because sales people (including you as the boss) are ever the optimists, with this statistic it is important to have VERY clear rules on what counts as a sale, otherwise it is very easy to have a varying statistic. At exec.io, we count Gross Sales as the total value of all accepted invoices written and sent to our clients each week, should a sale be made, the invoice sent, the client is happy and later the client cancels the order, this cancelled value gets taken off the following week's statistic as a penalty.

Gross Income (GI)

Many companies focus on Gross Sales and don't monitor Gross Income, but sales is only half the battle! You need to get paid for your company to survive.

Gross Income is defined as the amount of money (real cash) that is received into the business bank account each week. A common mistake with Gross Income is counting "sales' or money that has been reported as sent but not banked yet. At exec.io the way we count Gross Income is very simple. We have all our clients pay into specific bank accounts and then if the bank shows the money is there before the end of our week, then it is counted as Gross Income, if it is not there, then it is not counted. This removes all ambiguity.

Value of Service Delivered (VSD)

This statistic is the key one to measure how much your company is producing. Without it you can't tell over time if your business is expanding or not. Every job you do for a client has a sold for value, this value is on the invoice the client received and has paid for.

Value of Service Delivered is defined as taking every job you completed for a client and delivered as completed into their hands (exchanged with them) that week and adding up the value of all of these services delivered to get a total value. Note, if you shipped your product to the client on Wednesday, and the client didn't receive it until the following Tuesday, then it would not be counted on your Value of Service Delivered statistic until the following week. Value of Service Delivered must include this idea that the product has to be exchanged with the customer.

Cash /Bills

This is the overall statistic that the company or organisation needs to keep to ensure the long term survival of the business. It is a special type of statistic called a "Comparison Statistic" where two separate statistics (Cash and Bills) appear on the same graph together and are evaluated this way.

Cash represents the total value of liquid assets your organisation has available to pay bills. That is, cash in bank accounts or term deposits. It does not include assets such as the value of plant and equipment, real estate, office furniture, future contract value etc. It's just simply how much cash is on hand.

Bills represent all the unpaid bills the organisation has. This includes everything. The current mortgage payments on the building you are in, the current lease payments, any outstanding bill that has to be paid with cash that is either current or overdue. Note, this does not include future bills you will receive (even if these are on a lease or the like).

Cash / Bills then shows you how solvent you are as a company. The Cash graph (the solid line in the example below) needs to be above the bills graph (the dashed line in the example below). If these lines cross (bills being higher than cash) then you need to take urgent and drastic action to correct it as fast as possible.

Sample Cash Bills Graph

Cash / Bills is really the key statistic for the manager of any business and represents the end result of the other 4 statistics. There are several key things you want to check for on this statistics:

  1. The amount of cash on hand should always be increasing over time.
  2. The amount of bills due should be increasing over time (as your business expands, you will buy more)
  3. The value of bills should always be less than the value of cash, Cash / Bills should never "cross"
  4. The amount of money when you subtract Bills from Cash (the surplus) should be increasing over time, showing increasing solvency

In Closing

Every organisation needs the above 5 statistics as a minimum to be able to see where they are going and the overall health of the organisation. There are many other statistics that contribute to these, but in my experience, these are the key ones. This doesn't mean you can't keep more statistics for an even better view of your organisation, but if you aren't keeping any, the above 5 are a great place to start. I found out about these key statistics when studying the Administration Philosophy created by Mr L. Ron Hubbard and I thought I would share them with you here.

Good luck and get those statistics up to date!

Stop wasting time and money fixing the wrong thing in your company. You could have your key statistics entered in the next 15 minutes to have a clear picture of where you are going and what needs the most attention.

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