The thumbnail version:
- There’s usually a single critical number in every business that’s a quick measure of its health.
- Your job is to find that number and monitor it.
The full version:
Think about your car’s dashboard. Depending on the model and the age of the car, the dashboard will have a varying number of dials, gauges, and digital readouts. They all tell you something about the performance of the vehicle (and sometimes a whole lot of other information) as you’re driving.
But if you were on a road trip in tricky driving conditions and had the time to watch just one of those dials, which one would it be? I’d suggest it would be the speedometer because by knowing that single number—the speed of the vehicle—you’d know a number of other things as well. For instance, what your fuel consumption is, when you are likely to reach your destination, how quickly you could stop if the vehicle ahead stopped, whether you’re within the posted speed limit, and so forth.
Now apply that to a business setting. Business articles and books will encourage you to know your KPIs (Key Performance Indicators). But if you’re a busy small business owner with no time to monitor a series of KPIs (or the inclination to do so) what is the equivalent of your car’s speedometer that will give you a quick overview of how your business is doing at any one time? It’s your FF (Focus Figure).
To explain, here’s an example taken from a coffee shop in Calgary a few years ago. The owner’s primary concern was her monthly rent of $6,000 (it was a fancy location in a fancy building). If she didn’t make rent, all the rest was irrelevant. To put the rent issue in perspective, we came up with a focus figure based on the margin per average cup sold. At a margin of $2 per cup her focus figure to ensure that she could cover her rent, was 3,000 cups.
Every business has a focus figure, it just depends upon the business and the circumstances as to what that figure is. You need to find yours and then monitor it.
Footnote: The 3,000 cup focus figure brought the coffee shop’s high-rental dilemma sharply into focus for the owner. It defined a financial issue in units she could readily relate to—cups served. Needless to say, this coffee shop closed not long after.