Measurement That Matters

We’re warned that pride is a bad thing. And I fully understand. Pride entraps its victim in a blanket of mock superiority on its way to personal doom. Boasting becomes pride. Pride becomes conceit. Conceit becomes no one.

Funny, but the ever-boasting blowhard of self-achievement ‘thinks’ that their accomplishments make them more attractive, more fun to be around, more likable. None are true. Just as this paragraph started, they make you a blowhard.  Knowing all this…

My son graduated from High School this past weekend. I am proud of him. There, I said it. He got a scholarship in an honors program. He won the headmaster’s Award for Excellence. And all this was achieved with at least half of his parents not being all that great of a student (guess which one!).

If my chest pokes out any further, I will have Eva Mendez’ profile… or snap a rib. So I’ll stop.

The thing about school is that they ‘measure’. Scores are scores, grades based thereupon, college acceptance/scholarships directly correlative, segments sliced accordingly. “Oh, you made a 33 on the ACT test? You go in this stack. And you with the 18, you go over here.”

In the job world, the surface measurement is usually money. This – along with pride - is another set up for the Scriptural Sin Grab Bag. Sure, many worthy alternative definitions of success abound: title, influence, responsibility, result, impact. All are important; all worthy of your focus. Harder to measure, but worthy.

Yet here is THE problem with most contractors’ measurement and focus  Click to see how many thousands of people he can offend in 2 sentences or less…

Most don’t measure OR focus on measurements that matter. Look at your business license. Unless it says “charitable organization”, your obligation is to earn a profit. This profit – unlike the snide redefinition by the largely unproductive that consider profit as pure evil – became yours when customers paid you more than you paid for it. Simplified, but true.

I’ll go so far to suggest that accolades, unless they add to your cache, boost your position in the marketplace, distinguish you from competition, or can be monetized mean little. Even the Boy Scouts plot Merit Badges toward a larger goal.

Yet, many businesses don’t make the measurement ‘connection’. They look at some surface indicators and skip to the next. Just like a “great” student can be a common-sense village idiot, one needs to look deeper, ask the better question.

The oft-braggy points of “followers on Twitter”, “friends”, and “connections”, are fine gold stars, but unless convertible thereto by sales alchemy, they mean little. A friend of mine who runs a fine business here was awarded as a “Top Emerging Business” from the Chamber. When I congratulated him, he quipped, “Now if I could only use that award to make payroll.” He has his head screwed on very straight.

So, what do you measure, and how do you measure up?

• Lead Generation – This is the ‘surface’ seekers determinant of future sales. A good measure, resultant from good and steady marketing, italics intended. Yet many contractors who get low lead counts don’t measure that about 60% of the marketing dollars should be in Direct Response marketing. More leads should result in higher…
  
  
• Monthly Sales – Another surface measurement of health, but the more “telling” figures are just beneath a) What is the average transaction compared to year ago, b) What are the source of leads that got these sales? Usually, people DON’T ask the preceding, but jump straight to…
  
  
• Sales Closing Ratio – The number of transactions resulting from the number of leads spits out this over-rated measurement. Since profit is the business’ goal, the deeper motive should probe: a) Gross margin per sale, b) Gross profit per salesperson, c) Source of highest margin sales. Closing ratio is important, but only within meaningful profit ranges. Seek both. Higher profit allows for excellent customer service, more marketing presence, and the wise businessperson’s Holy Grail toward the measurement of…
  
  
• Customer Retention Rate – Most don’t measure this, so here’s my first installment of Dummy’s Guide to Business Math. If you’re acquiring customers at a 15% rate (contractor average) but losing 15%, then the ‘next level’ will remain elusive. I figured that out by myself. You think the “15% loss” is over-stated? Contractor average is between 9 and 11%. If you’re making no effort to keep, you’ll eventually run out of “new” customers to acquire, and will have paid a fortune for that lesson. You’re going to lose 5% of them because they died or moved, which makes them very difficult to service. Work at Customer Retention, and you’ll naturally get this…
  
  
• Customer Referral Rate – Another unscratched area that can have profound impact on your business. Most contractors “accept” referrals – who wouldn’t? – but what if you pursued them? Reward, incentive, remind, request, just plain ASK for them in a polite, non-threatening way and you’ll eclipse most of the dead-heads “waiting” on them to happen.
  

Our job, your job, is to earn a profit. In the end, the marketplace will tell you if you’re entitled. Repeat customers and referrals tell you even louder. Having the brightest employees show up to compete to work there says it louder still.

Measure the right things. Seek grades that would earn you a scholarship if your customers were your teachers. Because in reality they are.  From a proud parent still learning from his children, make your customers proud to call you their own.

Adams Hudson

Question: What is a measurement YOU use successfully in your business? Answers to coaches@hudsonink.com 

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