Drive Your Business Like You Drive Your Car
Driving is second nature to us, isn’t it? We check our instruments constantly and make adjustments without even thinking.
We should drive our businesses the same way.
Drivers use five main indicators to get where they’re going. Entrepreneurs need to use the same five indicators to be successful:
1. Fuel Gauge
We check our fuel gauge often because it sucks to be stranded. We check it as soon as we start our car and we check it often during our trip. We feel comfortable when we’ve got enough fuel; we feel anxious when we’re not sure if we can make it to the next station.
As entrepreneurs, we check our bank account and, as we get more sophisticated, our balance sheet. We don’t want to run out of cash because that sucks too.
Our tach gives us a sense of our fuel consumption. The higher the revs, the more fuel is being used. We automatically adjust by shifting gears to drop our revs.
Entrepreneurs must know their burn rate. How much cash is being used week by week? Month by month? And if the burn rate is too high we must quickly adjust it before the fuel gauge light comes on.
The speedometer tells us that good things are happening: there’s fuel in the tank, the engine is working, the transmission is engaged and the wheels are moving.
Most of us would say that the speedometer tells us how fast our car is going but it doesn’t. It only tells us how fast the wheels are turning. Sometimes the wheels spin madly but we’re stuck in snow or mud going nowhere.
Entrepreneurs must constantly monitor their firm’s activity. Are the phones ringing? Are the sales people busy? Are widgets being made? These activity levels tell us that things are happening. Be careful, though, because they don’t give us the whole picture.
We use our GPS (or look out the window) to know when we’ve got traction: yup, the wheels aren’t just spinning, we’re actually moving.
Similarly, entrepreneurs must dig into the effectiveness of their firm’s activities. Sure, the phones are ringing but is it from customer orders or customer complaints? The sales people look busy but what’s their close rate? We’re making lots of widgets but how’s their quality?
Checking effectiveness is Management 101 for a successful business. We must convert our cash into activities that move us forward.
Obviously this last item isn’t an instrument but it’s arguably the most important item. For without a destination how do we know if we’re making progress or when we’ve arrived?
Entrepreneurs must also set a destination. Sometimes it’s long term and aspirational like, “We want to be the highest quality widget producer in New Zealand” and sometimes it’s more focused and direct. “By December 2016 we’ll sell 40% of the widgets in New Zealand by offering the highest possible quality and the industry’s top customer service.”
A clearly stated destination focuses our activities, aligns our staff and lets us check our progress regularly and accurately. Perhaps best of all, it also lets us know when we’ve arrived so we can celebrate!
Remember learning to drive? We constantly reminded ourselves to check our instruments until good driving became second nature.
Learn to drive your business the same way and you’ll significantly increase your chances of success.
I invite you to follow me @stratpad.
First published October 13, 2014