StartupGarden: The Magic Numbers I Track Daily

The Magic Numbers I Track Daily

One of the best lessons I learned while covering small business at Inc. is that every small business should learn to focus on just one or two key numbers as an indicator of overall health. Bookstores and other retailers focus on inventory turn, for example. Or check out this great quote from a terrific Inc. article by Norm Brodsky on “The Magic Number”:

“I believe every business has magic numbers. A restaurant owner I know can predict his evening’s receipts by the length of time customers have to wait for a table at 8:30 p.m. My friend Jack Stack, the father of open-book management, told me about a guy with a gear-making company who can determine his sales from the weight of the gears that have been shipped. Not the dollars. Not the orders. Not the number or type of gears. The weight.”

Of course my personal business has its own magic numbers. I just choose not to track them. Here’s what I tend to check up on a daily basis:

The pennies that I’ve earned from my Amazon affiliate links
The pitiful rank of my book on Amazon
The traffic I’ve generated to my site, broken down by various categories
The comments or links I’ve generated through posts on my site or others

What I SHOULD Track Daily

The value created for customers in both financial terms and mission-oriented ones
Productive work time spent on real work
Number of words written on next book (i.e. the thing that matters most)

What do you track on an actual basis? And what SHOULD you track?

Posted by tom at September 20, 2006 08:50 PM

Comments

I couldn't agree more. This "Magic Number" (I like the term) is the key economic driver for a business. Every business should figure out what their key driver is. Now this isn't as simple as sitting down and deciding what the key driver is. In fact it takes companies months, sometimes years to truly understand what this key driver should be. Jim Collins, the author for "Good to Great" calls this number your "Economic Denominator". Collins likes the number to be a ratio of profit per x - profit per employee, profit per store or profit per customer. In my work I have also found that it is critically important to determine what this driver should be and guess what, it probably shouldn't be the same as your competitor. If you both have the same economic driver, then you are probably both working on the same things. Better for your economic driver to be something unique to your business, something that can differentiate the things you do.

Posted by: Remy Arteaga on October 3, 2006 08:43 AM

Like many bloggers, I obsess over my daily visit numbers, google adsense numbers, etc. The numbers are there... doesn't mean the daily numbers are meaningful. My statcounter service shows a chart, which is a great tool for evaluating trends over time (the long-term growth of my blog is more important than day-to-day blips).

In my day job, I consult and, from a "lean" perspective, I try to convince people to track the "critical few" metrics that really have a high impact. With modern IS, there are sometimes SO MANY metrics that are easily and automatically generated. "Just because something is easy to measure doesn't mean it's important," that's my motto.

Another thing regarding metrics, I HIGHLY recommend the book "Understanding Variation" by Donald Wheeler, the best book I've ever seen on applying statistical thinking and common sense to evalutating business metrics. The book is an extension of the old idea that "two data points do not make a trend."

Posted by: Mark Graban on October 20, 2006 01:00 PM