Weekly Thoughts

As some of you may have listened to already, a few of us have been a guest on Alex Bridgeman’s Think Like An Owner podcast, a show dedicated to the exploration of investors and operators in the small business space. Due to the interest in the podcast, Alex is creating a new concept, The Operators Handbook, aimed at “documenting the experiences and challenges of small company operators.”

We sat down with Alex for his inaugural edition on the topic of analytics and key performance indicators at our lawn care company, where serving over 10,000 customers across five branch locations provides enough scale to emphasize the importance of data.  Below are some excerpts from that article.  If you want to read more, check out http://www.theoperatorshandbook.com/.

Tell us why you track metrics in your business.

We believe in John Doerr’s concept of “measure what matters.”  To us, that means measuring the smallest, least common denominator of what is actionable for the people who are using that metric. There are tons of metrics business operators can track, with the simplest ones coming off financial statements.  But the question is, are those synthesized to their lowest common denominator or to their core component parts enough that they become actionable by the people who have those metrics in their hands?  For example, if your goal is to grow revenue, one metric you could utilize is revenue growth.  However, what drives revenue growth could be a whole host of underlying functions, meaning revenue growth alone may be too broad of a metric.  What does your sales funnel look like?  What does your lead flow look like?  What’s your closing percentage, and how does that differ for different products or services you offer?  While revenue growth might be a fine high-level metric, it’s neither boiled down enough nor is it actionable enough to make it a worthwhile thing to attempt to drive business forward with.

Our Technicians cover hundreds of properties each day across our service territory.  At this scale, we can’t evaluate ourselves solely based on anecdotes.  The stories told at that scale often differ from reality and data is a better way to provide an objective measure of what’s actually going on so we can make better decisions for the business

Can you dive into the specific metrics [you track]? 

We’re huge believers in paired metrics, which can tell a more complete story than a single, broad metric.  We also believe whatever metric you want to focus on, especially as the CEO in a small business, the team will find a way to drive that metric forward.  If revenue is your metric and you want revenue to go up, then guess what?  Revenue’s likely going to go up.  The problem is, it might not go up the way you want it to go up.  Employees might start discounting to get revenue, giving away freebies to book some revenue, or setting incorrect expectations just to land a job that you’ll then have issues servicing down the road.  Focusing solely on one metric can lead to unintended consequences.

We’ve developed three key metrics to provide some quantitative measurements of our field service effectiveness and performance: Budget vs Actual (BvA), Service Call Rate, and Customer Satisfaction.  When you line those all up in reviewing a field technician’s work, we have a metric for their productivity (BvA), a metric for their quality (Service Call Rate), and a metric for Customer Satisfaction.

Despite their usefulness, there are weaknesses in each of these metrics.  For example, if the customer doesn’t call for a service call, we might never know there was an issue.  They either tolerate substandard work or they cancel out of the blue–neither of which are great outcomes.  There’s not much we can do about that, but a cancellation sure hurts a lot more than a service call.

Just because we’re data-oriented and believe that you can’t manage what you don’t measure, doesn’t mean we don’t understand that you can lie with statistics.  If you only quote the right stats, you can make anyone look really good.  But there’s always some stuff you’re not going to capture with data.  Is the employee a good person?  Do they help others?  Do they have a killer attitude?  Are they growth oriented? There are plenty of other things you care about in an employee that you’re never going to be able to fully capture in a formula or in a metric.  It’s important to recognize and understand what you’re measuring and what you’re not measuring.  We don’t recommend being 100% anecdotally focused, but you also can’t be 100% data focused because purely objective data isn’t going to be able to capture all of what you care about in an employee.

What is the most important lesson you’ve learned as a business operator? 

It all comes down to the team. There is a saying we like that goes, “If you want to go fast, go alone. If you want to go far, go together.”  It doesn’t matter if you are a product or service company.  It doesn’t matter how much technology you use or systems and processes you establish.  At the end of the day, your company will only go as far as the team will take it.

We hope you enjoyed this excerpt from The Operator’s Handbook. Check out the full piece (and more!) at www.theoperatorshandbook.com.