Stop looking at your numbers

/in /by

Pictures vs. Movies

I tell biz owners “Numbers is the language of business”, but also that numbers rarely tell the truth. Not because we did bad math, but because we look at pictures when we should be watching movies. Want to know how you’re doing? Grab the popcorn.

Even if we think they’re important (and frankly, there’s only a few critical ones that are), we don’t look at the numbers the way we should.

Pictures vs. Movies
The most important use of numbers in business is to see trends, not to see numbers. Stop looking at your numbers – that will rarely help you. Numbers are almost always misleading unless they are put in a bigger context.

What if you look at this month’s numbers and they tell you that you won’t be able to cover your expenses. Is that bad? Not necessarily. What if they say you’ll make a bucket load of profit this quarter? That can be very misleading, too. In fact, both numbers might turn out be lies.

How can that be? I thought numbers didn’t lie? In the context of a trend, they don’t, but by themselves as a snapshot they can be very misleading. We need to see the whole movie to know what they are really saying.

Your Most Important Numbers Aren’t In Accounting
Amazon “lost” hundreds of millions of dollars for a few years straight, and if that was the only number they looked at, it would have appeared they were running off a cliff. But they had the sense to couple those accounting numbers with some even more important numbers outside accounting. In their case, the important number early on was market share, not profit. Profit became more important later. They were sacrificing short-term profit for long-term market share, and thus long-term bigger profits.

For any early stages business your most important numbers are almost always outside of accounting, usually in sales. Don’t ignore the accounting numbers, but our sales and marketing numbers are much more important. And the right question isn’t “How many clients do I have?” (that’s a snapshot), but “How many do I need, by when?”, and then, “What’s the trend – am I gaining enough clients in the right amount of time?” That’s a movie.

Retail stores love the last quarter of the year – they can look like they’re making money hand over fist. But if you put that in the context of the rest of the year, it might show that the store is about to go out of business.

If September looks worse than August, should you panic? No, you should look at last August, as well as what is going on in the market right now, plus what you’ve done to change your business if anything, and a number of other non-number factors. All of that together can help you identify a trend.

The best use of numbers is to see the longest trends possible, a quarter, a year, two years, even more. If you’ve got three years worth of numbers to look at, you’ve got a movie that will give you a really great idea of where you’re going and the real strength of the business. August doesn’t matter nearly as much as how it looks next to last August, or your forecast for next August.

In about the 12th month of Crankset Group I wondered if this was going to work. Then I looked at the TREND over the first 12 months and saw plainly that it was going in the right direction – too slowly for my taste, but still trending the right way. And if we just kept the same trend for another 12 months, we would be profitable.

We decided to keep going, the dam broke and three months later we were over the top. The trend was so much more valuable than the numbers themselves in deciding what to do and keeping me encouraged.

Stop focusing on pictures of where you are, both in accounting and throughout your business, and start focusing more on where you’ve been and where you believe that trend is taking you.

FYI – charts are like pictures, but graphs are like movies. I like graphs more than charts. And I like any number in a context that can show me a clear trend over many months. Only then can I really know what the number means and how I my business is really doing.

Stop just looking at numbers, you’ll glaze over like I do. Look at the trends instead. Watch the movies of your business to see how you’re doing and you’ll have the confidence to keep going and to make more money in less time.

 

A Focus on Finding Customers Online Doesn’t Work.

/in /by

But social networking does – there’s a big difference.

If you’re focusing on getting new customers online, research shows you’re not going to get many. By they way, it’s no different offline. This study could rock the online marketing world, or at least the SEO’rs, who focus on activity vs. results.

In the dark ages (Nov. 2008), when the biggest Twitter account had “only” 73,395 followers, I did a post on Why Social Networking Can Be a Bad Idea . A year later (Sept. 2009) I challenged the common usage of the term Social Networking .

This month Gallup released results of an intensive survey – Social Media: The Three Big Myths – saying much the same thing – you won’t get new clients from social media. So why do it?

Stop Focusing on Selling
The big myth is that using social media to focus on getting new clients works. Gallup confirmed that it doesn’t. They surveyed 17,000 people to find out this big duh. Gallup went on to say that we should instead focus on engaging our CURRENT and ENGAGED customers instead. Another big duh.

We just don’t believe being human works.

Social Networking is Best Done in Person, THEN Online
We keep trying to digitize our relationships, and big surprise, people actually want to talk with people instead. A study by the Wharton School backed this up in Dec. of 2010 – over 90% of word-of-mouth product discussions happen offline and a significant chunk of the 10% of online discussions, start offline. Social networking has always been, and will always be more of an offline way for people to engage with each other.

Here’s a clue:

People buy from people, and they buy more from people they like.

This manic need to avoid relationships and just sell our shiny object isn’t new. You’ve all met “that guy” at a networking event who is the offline version of the pop-up ad, always in your face with a product you weren’t looking for. He has no interest in you as a person, just as a target. Online marketing suffers from the same self-focus.

We just assume that because our product is so great, all we have to do is get it in front of new potential clients and they will buy. Gallup confirms that not only will this focus on new customers not work online, you can’t even expect to retain your existing ones via online communications.

The key word here – focus.

Gallup confirms what I’ve believed about online media all along – you are unlikely to engage new prospects by focusing on them directly through online media. Instead, Gallup shows that the best use of online media is to engage with your most ACTIVE and COMMITTED customers online, and as you engage them, gently encourage them to advocate for you.

We think social engagement online will make someone want to buy, but now we have hard core evidence that’s not true. Just the opposite – being engaged as a customer will drive social engagement and make them want to talk to you online. And those existing customers will advocate and bring new clients – you won’t.

The Game Changing Conclusion
Want to win new clients online? Stop focusing on them, and go back to building raving fans with your existing clients – they will bring others to you.

Again is there anything new here? My wife went to this place called Panera Bread many years ago. They focused on her as a customer, not me as a potential customer. She came home and told me about the place, and I’ve spent thousands there since.

The big successes will come when you can engage your existing clients and raving fans both online and offline simultaneously. That’s a powerful use of the online world – as another place to meet your friends.

The SEO’rs won’t like this, but it’s not about click-throughs, which by this study, are largely added noise. It’s about existing committed/loyal clients bringing others to your site.

Why are you online? To get new customers? Think again. The best way to make that happen is to focus instead on the people who already love you, and let them do the Panera Bread thing for you.

Why You Don’t Want Employees

/in /by

It’s Usually Something Else.

“Employee Problems” doesn’t mean “Problem Employees”. We miss cause and effect all the time, and most employees usually aren’t at the bottom of employee problems.

Edward Deming, the father of Process Improvement, said (paraphrased) that when an employee screws up, we assume right away that we have a bad employee, when in fact there are a dozen other things we should look at before we come to that conclusion. Deming suggests the problem may be somewhere else. I couldn’t agree more.

First look at the vision for your company. Don’t know where you are going? Then your employee can’t be in trouble because they aren’t doing ANYTHING that will keep you from getting there. Deming and I would both say get your vision fixed first.

Then look at your mission – do you have a clear understanding of the results you are to produce for your clients? If not, how can your employee harm your lack of clarity? He’s doing “badly” because neither he nor you know what a good result even looks like!

If your vision and mission are clear and everyone is on board with them (including your “problem employee”), than take a look at your leadership. Are you leading the way you should? Are the other leaders in your business leading the way they should? If not, why would you expect a great follower?

Then look at your infrastructure – does your employee have the tools and environment to be successful? If so, great. But is the employee properly trained including ongoing training? If so, you can check that off.

If all the above is in place, does your employee have clear expectations for performance, and clear WRITTEN processes for getting there? If not, then you’ve got some work to do here.

And finally, if all the above is in place, you have to ask yourself, did you hire someone who doesn’t fit your culture? Did you get tempted and hire for skills even though you knew this person didn’t fit?

If all the above is checked off the list, you probably have a problem employee. But how often do we look at ourselves and our own companies before we throw stones at our people?

It’s a lot easier to see that you have a problem employee, when in fact, more often than not, you have an employee problem, or actually an EMPLOYER problem, neither of which was caused by the employee.

Do you hate the thought of ever taking on employees or managing the ones you have? Are employees convincing you by their behavior and results that employees in general are simply a bad idea?

The fact is that your view of employees is not a result of employees in general being a bad idea. It’s because you are not willing to deal with the need to address your own soup and the things above that will help you actually build a business where employees could be stakeholders who find real significance.

If you don’t like your existing employees or hate the idea of ever having any, take a look at your own issues and unwillingness to build a business. The problem is there more often than with the employee.