What To Measure In A Small Business?

The biggest mistake that small business owners make from the outset in their business is that they do not keep score. And I do not just mean the money side of things.

Activity leads to Results which leads to turnover, but not necessarily profit.

I met a young entrepreneur of 21 last week. He had been in business for about 6 months and was now looking to expand his business – Fair Play and well done to him for thinking like this. We encourage this type of thinking and wish there were more of it.

His expansion plans would cost €60000. If you spread this cost over 5 years with no interest, this equates to about €12,000 per year or €1,000 per month.

I asked him if he believed that the investment would help him to generate an extra €2000 in sales per month with 50% Margin. He was unsure.
I asked him how much each sale was worth to him. He did not know and had kept no records.

His belief in the product and business were strong. He probably would grow the business by €2k per month. But we should be basing the decision on factual information or at least using some facts to support the decision.

His proposed business venture would not necessarily generate any additional enquiries for him and he was doing all the work that presented it self to him as it was. SO where would the extra €2k per month come from. In his business, this would represent about 15 extra jobs per month.

That was a lot.

Base your business decisions on factual information where ever possible. Your chances of success are higher or your risk of loss is reduced.