Written By: Richard F. Libin
To make a difference in performance, businesses must look at the daily traffic count. These numbers, the right numbers, enable changes to be made and problems to be addressed in real time. The traffic count is a powerful, up-to-date tool for businesses who want to drive performance every day.
Monthly financial statements can paint a bleak picture in uncertain or “down” markets, yet many of the nation’s businesses show positive financial results and even gains, despite uncontrollable market challenges. It’s these businesses where management has set a positive tone and ensured it permeates the entire team. In these businesses salespeople greet their customers and co-workers with a positive mindset that acts as a self-fulfilling prophecy to deliver even more positive results.
The difference? The 10% are managing by the only numbers that matter – a count of the actual traffic coming into the businesses every single day. These numbers paint a real picture of the “state of the state” of their business and help management stick to the basics and succeed in an uncertain market. Those managers who rely solely on month-end financial statements essentially rely on a final performance report card, allowing them to manage the business on historical data after the fact. These managers often succumb to negative month-end reports, ultimately cutting the programs and people they need to drive business forward. Success comes from managing business daily using real-time, accurate data.
Manage by the Numbers, Not the Financial Statement
To make a difference in performance, businesses must look at the daily traffic count. These numbers, the right numbers, enable changes to be made and problems to be addressed in real time. The traffic count is a powerful, up-to-date tool for businesses who want to drive performance every day. In contrast, the financial statement is an historical record providing data that is six weeks old. By the time the manager sees this report, the opportunity to make a change is past, not only for the month in review, but most likely for the month in progress as well.
The most consistently successful businesses today “close” the month every day with every customer. Let’s consider two car dealerships as an example. Dealership A and Dealership B both sell an average of 100 cars per month, both are exposed to the same external influences, but each takes a different approach to managing by the numbers.
Dealership A’s management uses an accurate traffic count that comes through the door each month, say an average of 400 – 450 people. Despite averaging only 100 sales per month, the dealer sticks with the fundamental concepts for running a successful business. He adds salespeople, manages inventories the same, and focuses on relationship selling. He puts a process in place that holds every employee accountable for performance and measures it daily. With his managers, he develops a plan to hit a specific gross revenue target each month. This target is divided into weekly and daily goals for every part of the business, and communicated to every employee. Daily, the dealer holds managers accountable and the managers hold their sales teams accountable for hitting – or exceeding – the goals. In this way, the dealer, managers and salespeople have an exact traffic count and know exactly what happened to every opportunity that came into the showroom each day, why it happened, and what to do to improve. The result? Dealership A’s financial statement no longer shows peaks and valleys.
Dealership B’s management uses the monthly financial statement as the basis for decisions. Since the dealership typically sells 100 cars a month, they employ 11 salespeople, in line with the market averages. Anticipating a market decline, the dealer decides to protect profits by cutting back on advertising, training, staff, inventory, perks and promotions. So questions arise:
– What’s the fat and what’s the muscle?
– Who do you cut and why do you cut?
– Do you cut because the position is no longer needed nor do you cut because the financial statement shows you need to cut expenses?
– What message do you want to send employees about how you manage your business?
Analyzing the right numbers and ‘closing the month’ every day will enable managers to determine the best approach: cutting high salaried or lower salaried employees vs. changing the approach to closing opportunities vs. adjusting the projections (if they are too aggressive). These decisions will ensure that the manager doesn’t cut the muscle – important basic requirements of running a successful dealership – from his business. Those managers who rely only on end of the month, historical financial statements generally make the wrong decisions, cut the muscle and create self-fulfilling prophesies that bear out expectations: lower business and profits.
The difference is clear. If a manager is not measuring performance based on projections every single day, are they truly managing their performance? No. Those who do measure gains and weaknesses daily will know where they stand giving them the opportunity to proactively correct slips before they become problems. These managers can hold their salespeople accountable for doing their jobs, and by example, train the next generation of management. When managing by the right numbers, the traffic numbers, typically business will continue growing at an even pace. Which would you rather be – Store A or Store B?
Richard F. Libin
Richard F. Libin has written two acclaimed books that help people of all walks…
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