A few years ago I ran a 100+ store retail chain. I started it out of a spare room in my house. It grew quickly and within five years became the market leader in its sector. Looking back at how many mistakes I made in the early days it is amazing to think that we even survived the first year let alone continued to prosper 15 years later. No doubt a big slice of luck helped.
One thing I learned early on was that it didn’t pay to have a large set of performance tracking numbers in your business. A small number of key performance indicators (KPIs) was critical but too many would be counter-productive. The key for me was to find the magic number(s) in our business that would really drive performance and galvanise the efforts of the team.
What we discovered was that the most value would be created by focusing on increasing the number of multiple sales made (i.e. transactions comprising more than one item). Before we started measuring it multiple sales were 20% of all transactions. After two years of consistent effort we improved it to 30% which increased our profit by 25%. This was done without increasing the number of transactions,customers or our cost base or engaging in price discounting. We had found our magic number.
But we had to do more than just start measuring it. We had to adjust our operations to extract the value we were seeking. To do this we aligned our total operational efforts behind answering the simple question – if we do this [insert the action being considered] will it help us increase multiple sales? If it did we implemented it; if it didn’t we moved on. This simple approach was a major factor in our rapid rise to market leadership.
Another business that I have been coaching for some time was struggling to get traction in its sector. It had an unclear market proposition and a confusing product offering. We spent time simplifying its business model, improving its offerings and determining its best sales channels. We then got to work on discovering the magic number(s) that would unlock the future value of the company.
In the end we concluded that each sales person had to make sales pitches to 12 prospective clients each week and convert 20% of them to a sale. Their magic number became “12 x 20%” and all company efforts were coordinated behind hitting these numbers. Within three months the company was achieving a level of sales activity previously thought unattainable.
Finding your magic number can be difficult. It is unlikely to be immediately obvious and will be different for every business. Do you know what yours is?
Image Via BEHANCE NETWORK