WHY YOU NEED NUMBERS
Have you run your business “by the seat of your pants” and managed? Well done. However, today’s challenges may require you to make better decisions in order to keep up with the play. Also, you want to be confident that your decisions are based on facts right for your business
With this in mind, it could be useful to start “dashboarding.”
What is dashboarding? It is simply keeping a monthly record of the key numbers in your business – numbers that you can use to plan your future with a degree of confidence.
If your business doesn’t have a dashboard, then you are likely reliant on your gut feel, or on copying what others are doing. Moreover, your accountant’s end of financial year results, while accurate, are not very helpful for making day-to-day decisions. Have you ever met a builder who consults annual accounts on a daily basis?
Below are five reasons why it’s worth the effort to become proficient at dashboarding. Objective view
1. Objective view
The old proverb “you can’t see the wood for the trees” tells us that, when we get really involved in the detail of a situation, we easily lose sight of the bigger picture. Without that bigger picture, we may be governed by our own opinions and feelings – opinions and feelings that we may believe are the only truth. This can be dangerous!
The good news is that we can overcome this danger by dashboarding. It gives us the actual facts about our business performance. Armed with these, we can go to work and make much better decisions about future actions.
2. Measure trends
Whether you like it or not, you live in the moment – it’s the only time you have. Sometimes the emotions of that moment colour the interpretation of everything else, pushing you to make a wrong conclusion or a poor decision.
For example, a builder I know was facing some immediate pressures which led him to contemplate quitting the business altogether. Right at that moment, a job he was running wasn’t going well and he seemed to be making no headway at all.
However, after a careful comparison of the key business indicators, in the current quarter against the same quarter last year, we discovered that his turnover had actually more than doubled and the net profit had increased seven times!
Overall, the business was moving in the right direction. Admittedly, it was from a low start but the trends were clear. Everything he had been doing was now beginning to bear fruit – it just needed a little more time to become obvious, in spite of some ups and downs.
The thing is, when you keep records, you’re able to track small movements of important ratios and numbers over longer periods (say three months). Reading these trends gives you assurance that you are on the right track, or not.
3. Get early feedback
You need to know if a new initiative is working as soon as possible. You want to know that it is working for you, rather than against you.
For example, if you trialled a scheduling process on a job and it worked well and the team liked it, you might be tempted to run it out on all your jobs. But if careful analysis of the results showed that the job ran a little behind schedule and a little over budget, you would probably want to test another process, or at least trial it again. If you did go ahead and roll out the process just based on a feeling, without knowing the impact or without amending it, your business would gradually lose profit and might eventually fail.
Dashboarding can give you that specific information early – that way, you can quit or amend your processes before it’s too late, or implement them with confidence.
4. Identify intervention
There are plenty of people who are very happy to tell you what you need to make your business fly – “Market more! Sell more! Buy my system! Use my tools!” The list goes on. While this may be great general information and useful at the right time and in the right place, it’s highly unlikely that it’s all relevant at the same time.
Imagine if every time you put your truck in for a service, your well-meaning mechanic overhauled the engine, replaced the gearbox and fitted new tyres, just because new ones are great to have. Well meaning, but inappropriate.
Careful dashboarding can help point out areas in your business where you are weak, or where you have a particular pressure point. If you know this, then you are able to cut through all the advice and focus on the things your business needs now.
For example, a builder having trouble paying her bills, starts dashboarding and discovers that everything is fine – except that her gross margin is 10%, just a little less than her overheads at 11%. She doesn’t need more clients or sales, she just needs to price better, and/or get her team working more efficiently. Focusing on more sales could just make the loss even bigger.
Never prescribe without diagnosis!
5. Compel responsibility
Building businesses can put large amounts of cash through the bank. The numbers can be eye-watering, but a bank account does not paint a true picture of the actual state of the business. To make matters worse, when there is cash in the account, it can be tempting to splash out on new equipment, vehicles and toys – only to discover it is not sustainable. Everyone knows stories where this has happened.
When you get into the habit of checking your dashboard regularly (at least monthly), rather than just the bank account, you are informed of the actual performance of your business – not your imagined performance. You will be able to better anticipate tax payments, future staff requirements, cash flow pressures, and be better prepared to act now for better stability in the future.
If you now feel compelled to dashboard, but you are not sure where to begin, search “dashboard” on the Under Construction website for the article, Stay On Track With a Dashboard. Or get in touch.
Graeme Owen is a builders’ business coach at thesuccessfulbuilder.com Since 2006, he has helped builders throughout New Zealand get off the tools, make decent money, and get more time in their lives. Grab a copy of his free book: The 15 Minute Sales Call Guaranteed To Increase Your Conversion Rate: thesuccessfulbuilder.com/book-15-min-sales-call or join Trademates and connect with builders who are scaling too: www.facebook.com/groups/TradeMates