| Imagine you own a successful business but become | | | | of most dashboards. In addition, total sales should be |
| stranded on a deserted island. The only communication | | | | included so we know how our volume is doing on at |
| you receive about your business comes once a week | | | | least a weekly basis. Sales should be communicated in |
| on a sheet of paper in a bottle (yes, a message in a | | | | terms of dollars, number of sell-able units, and average |
| bottle). What information would you need and want on | | | | pricing. |
| that paper? When you remove the subjective | | | | OPERATIONAL EFFECTIVENESS |
| elements of running a business and try to do it on | | | | Since sales is responsible to turn the leads into a |
| objective data alone, how does that change your | | | | paying customers, we desire to satisfy and retain the |
| ability to make the right decisions? | | | | customer as long possible as effectively and efficiently |
| DASHBOARD | | | | as possible. The point here is to structure our business |
| For the purpose of this article, we will refer to this | | | | model so that we deliver everything we promise for |
| piece of paper as a dashboard report, although it may | | | | as little cost as possible. Let's review a couple of |
| also be called a flash or KPI (Key Performance | | | | examples. |
| Indicator) report. The dashboard should be critical in | | | | If I am a professional service firm that is mainly selling |
| assisting an entrepreneur or business owner predict | | | | time in exchange for services, then I am concerned |
| sales, cash flow and profit and gain clarity on the | | | | about my average cost of paying staff per hour as it |
| performance and direction of the company. In addition, | | | | relates to my average revenue per hour. I will also be |
| it should be a critical decision-making tool used in the | | | | very concerned with ratios like revenue per employee |
| day-to-day operation of the firm that empowers | | | | and sales-to-wages. |
| CEOs and business owners to make the best | | | | If I manufacture products, then I will want to understand |
| decisions for their respective companies that will drive | | | | the efficiency of all of my inputs, including materials |
| cash flow and profit. | | | | (and scrap), labor, contractors, and other direct costs. In |
| There are three main steps to consider in building an | | | | essence, we need to look at the major determinants |
| effective dashboard. First, we should know the | | | | of our gross margin. |
| averages and benchmarks for our industry. Second, | | | | We should consider three additional metrics on our |
| we should know what our historical performance on | | | | dashboard that deal with operations. First, an indicator |
| these same averages and benchmarks. And third, we | | | | of our current utilization of our total available capacity. |
| have to develop what many call a balanced scorecard | | | | Second, customer satisfaction and retention metrics |
| that comprehensively examines the whole company, | | | | are a valuable barometer for ongoing sales. And, third, |
| not just one or two parts. | | | | a measure of product or service quality levels. |
| SOFTWARE AND TRACKING TOOLS | | | | FINANCIAL - CASH, PROFIT, & HEALTH |
| The answer is not to initially buy a business metric or | | | | We should know what is happening with all of our |
| dashboard software program. These tools are | | | | major current assets, which usually includes cash, |
| valuable, but every business needs to initially determine | | | | accounts receivable (AR), and inventory. We should |
| what metrics it should track. In fact, it is always best to | | | | quantify the performance of our AR in terms of total |
| use Excel or even a pen and paper to initially track | | | | % over 60 days past due as well as the Days Sales |
| several different metrics. It is nearly impossible to know | | | | Outstanding (DSO). We should understand if our |
| which metrics will be the most effective until we get | | | | inventory levels are at efficient levels. |
| some experience with it. We can save money on the | | | | We may want to include some of major current |
| software for now and focus on finding the best | | | | liabilities, like accounts payable and line of credit |
| metrics for our business. Once we know the metrics | | | | balances. This information leads to the tracking of the |
| that are the most effective for our business, then we | | | | firm's current ratio on a weekly basis and other |
| can consider investing in a dashboard tool. | | | | versions of the current ratio that traditionally predict |
| Marketing, sales, operations, and financial are the four | | | | cash flow with some accuracy. |
| main categories every business needs to include if we | | | | CONCLUSION |
| want the dashboard to adequately inform us on our | | | | If we received a weekly dashboard report with all of |
| deserted island. We will briefly discuss each of these | | | | the information above (tailored to our industry and |
| areas below: | | | | business model), how well do we think we could |
| MARKETING AND LEAD GENERATION | | | | manage our business from a deserted island? Now, |
| This is where it all begins. We need leads if we ever | | | | we should imagine having all of that information every |
| hope of acquiring customers. Our dashboard should | | | | week along with being in our business every day. Not |
| include the top two to four metrics for measuring our | | | | only will we feel empowered to make the right |
| lead generation. These may include number of visits to | | | | decisions to improve cash, profits, and financial health, |
| our website and percentage of those visitors that | | | | but we will see our level of anxiety (which comes |
| become qualified leads. The key here is to focus on | | | | from a lack of this information) drop significantly. Even |
| the processes you are currently employing to market | | | | if the dashboard reports bad news, knowing about it |
| and generate leads and measure on your dashboard | | | | will still reduce our anxiety because we will at least |
| the efficacy of these efforts. The cost of acquiring a | | | | have the opportunity to do something about it before it |
| lead should be included if it is measurable (and it almost | | | | becomes worse. |
| always is). | | | | As part-time CFOs, we have seen consistent results |
| SALES | | | | with those who effectively use dashboards - better |
| Obviously a lead is still useless to our business if we | | | | information generates better decisions, and better |
| cannot convert the lead into a paying customer. | | | | decisions lead to improved performance. |
| Conversion of leads to customers is a critical element | | | | |