Using data to improve your business is more important than ever. Insights from metrics and numbers can help reveal issues before they occur and track progress towards your goals. The problem is that there is a lot of data, and itโs not clear which number or metric you should focus on. You need to know what story the data is trying to tell you then act on that information.
Letโs look at how you can track the right metrics to improve your business operations.
Set goals for your operations
Before you start creating dashboards and setting up reports for a bunch of metrics, numbers, and thresholds, stop and consider what you’re trying to measure. Increasing revenue is great โ itโs an easy number to track โ but without the context behind it, there is no direction to follow.
Operations matter because we give them meaning: they serve as a means to achieve our business goals. The right numbers can help measure your progress and refine your operations as you work towards these goals.
Example
Marty, a cafe owner, wants to find a way to increase revenue from his existing customers without raising prices. He looks into his POS sale report and finds:
Customers often only buy coffee.
Food sales consist of one or two items on his menu.
Marty decides to shrink his menu to popular items and create a brekky special promo to include a coffee and a rotating food item. This helps offer more value and reduce waste.
The metrics Marty uses to track operations include average spend per customer (average check), how often breakfast specials are sold (food sales), and whether his customers keep coming back (customer retention).
These metrics help him track the success of his operational change. If the change doesnโt move the needle, he can look at food quality, food prep time, and how the special is promoted for answers.
On the flip side, if Martyโs changes do work, he can see the evidence in healthy margin returns because heโs earning more per staff hour. He will find more answers from the specialโs share of the total number of food units sold over time. If the sales are a net add and don’t eat into other sales of other items, he knows it’s working. This supports the increase in revenue and isnโt a one-off.
Applying metrics to your workflows and processes
Once you have your goals, itโs time to attach a combination of metrics to parts of your operations to track.
1. Map out the process
The first step is to map out a process or procedure. This involves breaking it down into a workflow and highlighting each stage. This is important because you need to know what the process looks like at each stage to apply the right metrics to track.
For a cafe, like from our example, it would look something like this:
Customer arrives > Offer presented > Order placed > Payment taken > Prepared & served > Customer leaves
Once this has been mapped out, move on to address the main pain points of this workflow: the obstacles you and your customer face. This could be an unreliable staff member from an operational perspective, or a lack of payment options for customers.
2. Select important metrics that actually track progress
The metrics you choose to track your goals need to tell you something of value. Donโt choose something like raw revenue. Instead, pick numbers that:
- Track the progress of a specific outcome.
- Show what areas need improvement.
In our example, Martyโs metric choices are average check, food sales, and customer retention.
If the numbers improve, the change is working. If they donโt, he can look at what the problem is, such as food quality, prep time, or how the special is promoted, rather than pushing harder to sell.
3. Determine the targets to evaluate
Set targets for the combination of metrics you use. You can look at industry standards here for guidance, but in the context of your business, does it make sense to follow the average or go above it?
For example, consider a business in an industry where food wastage is between 3-5%. That may be too high for a business operating under razor-thin margins, so 1-2% better reflects their operational needs.
4. Build dashboards and reports for monitoring
You need to be able to see your numbers; you canโt have them floating around in different reports or software programs. Create a dashboard that tracks everything in one place.
You can draw these figures in your accounting software, POS, CRM, or even manual spreadsheets like Microsoft Excel, and plug them into a weekly or monthly dashboard or scorecard. Make sure to incorporate trend lines or heat maps to get quick impressions.
Turning data into decisions
Once youโve set your goals, mapped out your processes, attached metrics, and created your dashboards to track, now itโs time to put your process into action and test it. This is how you can turn numbers into actionable decisions.
1) Run your test period
Select a start and end date (e.g. 4-8 weeks) and the metrics that signal progress. Marty has chosen the average order value (average check) for positives and the waste % for negatives.
2) Results vs your baseline
In your sample period, compare the same days/hours. If your metrics signal positives, lock in your improvement. Mixed or negative results may need you to fine-tune the workflow: choose a bottleneck, rework, and test once more. Results still mixed? Stop and reassess.
3) Lock in improvements
Changes that work become part of your standard operating procedures. Update your SOPs, train your team, and confirm your targets as part of your reporting routine.
4) Review and refine
Include reviewing your metrics as part of your admin time. Over time, changes in the business will affect your processes and the metrics you track. When a metric doesnโt influence a decision, retire it.
Measuring operational success as a small business
Great operations need many moving parts to succeed. One metric canโt tell the whole story; your operations need a variety of numbers, goals, and processes to work together for success. Build workflows with a goal in mind and attach metrics that track improvement. That way, you create operations with purpose โ one that you can measure.
