Welcome to the Dare to Scale show with me Warsha.
And me, Evan.
So, what is Dare to Scale? Over the years that we've been coaching founders and business owners, much like yourselves, we work through a framework called Dare to Scale.
Dare to Scale indeed. That framework has helped loads of business owners. And that is what this show is all about. So, put on your big picture thinking hat.
Oh, and your headphones, and come join us and enjoy the ride.
Heyyyyyy, glad you joined us today.
Hi, glad to have you with us. Wonderful show for you today, I think it's a wonderful show.
It's a wonderful topic. Let me say it like this. It's one of the critical topic.
Yes, somewhat dry though.
Somewhat dry though, so, yes, I am looking forward to this.
I am sure you are.
So okay, lets sort of set the scene.
At some point little while back you gave me some advice.
Right and where you were talking about how to drive a car or something.
Ahhhhhh yes driving a car. So, Evan you drive a car, right?
I do indeed.
Okay, when you sit down to drive a car .
What do you see around you?
Steering wheel obviously the controls gear stick, windscreen.
Mirrors and stuff.
You have this big
windscreen in front of you yes?
Okay, what else do you have?
The rear-view mirror.
Ah the rear view mirror and you have the wing mirrors.
Oh yeah, so when you sit down to drive the car where do you look?
In front yeaah great answer.
So, that big windscreen is so big and clear, hopefully clean because it gives you a clear view of what's ahead of you.
What you are driving into.
Or hopefully not into the clear road that you are driving on.
The road ahead. So, what is the point of the rear-view mirror.
To see behind you.
To see behind you. So, what's the point of the wing mirrors.
Same again, and if you look at the comparative sizes of the rear-view mirror and the wind screen.
What do you note the windscreen is massive.
Yeah, much bigger.
To give you a full, maybe not 180, but nearly 180 view of the road ahead.
And the rear-view mirror is much, much smaller because that mirror is to be used only as guidance isn't it? Just to make sure that there is nobody too close to you no one is going to crash into you.
Or just to make sure that if you want to change lanes to make sure that you are not caught unawares by what's
And when you drive a car where do you look most of the times.
In front straight.
In front nearly about 90% of times you are looking ahead.
Yeah, now when you are running a business or just as your life.
If you will and that's when you heard me talk about this because it was very much in the life context, where how to do we lead our lives, do we lead our lives looking ahead or do we sit facing the wrong way around in the car we drive forward but looking back because that's mostly how we lead our lives by living today and planning tomorrow by always looking at yesterday.
Oh what look at least you did say you are driving forward right so.
You are driving forward.
You are not looking backwards and going backwards.
That is true.
That is true.
So at least you are driving forward.
So, that is what I was talking about in the context of how do you lead your life. You lead your life always looking at what happened in the past or are you saying what's ahead of me and what can I do today to make tomorrow great.
Which leads us wonderfully into the subject of KPI's.
Oh my goodness ya okay, if you say so.
So, the point there is dashboard right.
When you are running your business you would have systems you record revenues and costs and profit and all that sort of stuff and essentially what we are saying is your rear-view mirror is your financials from the past.
Or yeah, not just finances but the historical record.
Okay so there are metrics all stuff that is behind you.
Something that reports what has already happened.
Absolutely, so you gonna find some things from that.
But the thing there is that it does not always help you necessarily predict what is going to happen.
And those backward-looking indicators those KPI's are lagging indicators.
So things have already happened and you might be able to work out the trend based on things that have actually happened but it doesn't always help you look forward. So, when you're driving your car you really want to be looking forward. By all means have a look in the rear-view mirror, great there is nothing there that's a concern.
But you want to be looking forward and that's why you need forward looking indicators right basically it's
a leading indicator.
And in all cases it is like business on the books.
How you trending with the business on the books in the beginning of the month and as you are planning the month itself and getting those measurements and as the month or the quarter is going as you are going through the quarter.
Progressing through the quarter.
Exactly you can see where you are you might have a budget number against that but you also have the same information from last year to see how.
How your trends are.
Exactly so how you picking up for the that quarter whether there is a good chance that you will actually meet budget.
That sort of thing so now okay so KPI's they are very dry but they are necessary in your business.
So, what are some of the examples of a KPI with finance.
what are some of the KPI's for finance.
So backward looking ones, things like you address your profit some of the percentage alright revenue over the net profit okay great if you doing you know say 25% it's a good number if you are doing 5% not quite so good.
You know what I mean so.
It gives you a fairly good feel of how profitable business is.
When you start throwing in non-financial metrics as well so, hospitality game for example you have a static number of rooms.
And you have revenues coming for those rooms so you have revenue per room occupied or revenue per available room and again those because their contrast again non-financial metrics.
It gives you a very good feel for the other parts of the business it could be revenue per employee.
It could be number of hours worked that kind of thing so.
How the bits of the business and you are linking them to financial sort of pieces and it gives you
Of how the different ratio is within the business is working.
Nice, before I go deeper into those examples you said something revenue per employee, I think that will
be a great topic to address in one of the later discussions
Because during as a Gazelles coach we work with a fabulous tool called Labor Efficiency Ratio.
And I know that has helped a lot of people I coached a great deal in seeing how productive are their employees and what each role actually brings in.
And what it does take into account is things like your non-operational team.
So, it's a total headcount.
It's a total headcount.
This takes into account the fix cost.
So it's very interesting.
Yeah, so we will have a separate discussion about that, so where are the some of the examples of leading and lagging in HR for example.
Man power planning.
While the definitely man power playing is a churn rate that's an historical.
That's an historical one so that's your lagging one.
Yeah So, it's a retention kind of space.
So the training that is going into the team.
So, keeping up with the brands standards that kind of stuff.
And of course there are different ways to use the KPI's so like a balance scorecard is a great way to do it you will have financial metrics, you will have HR metrics.
You have brand standards.
That sort of thing.
In a high-risk industry may be risk assessment.
Not risk assessment but safety measures.
Safety measures exactly so in constructions you have accidents that sort of .
So all of those things come together.
And particular about the balance scorecard and you know you have an operational team where you incentivizing it's not just about profit.
And itself its starts landing towards compensation responsibility and those sort of things so it's a bigger picture and measures together and it gives you a picture of your business.
And also it to that strategy ones before.
And but you would like to have the one thing that matters making talk about that little bit later.
So, one of the examples that comes to mind this was fresh in my mind because I was recently having a conversation about this in one of my sessions is how do most companies track sales. Most companies well hopefully not too many companies out there but most companies track sales as an historical event.
When I say historical as so the month is ended how did we perform last month.
And not so much as a live meeting literally every week, more often again if depending on your industry at least once a week so, really seeing where you want to go again goes back to the strategy what is your north star what is your goal what are those targets that you have set for the whole year how are they broken down into quarters if it's the seasonal scenario for your business or a calendar quarter and further broken down per month per week even.
And really seeing how you I you meeting your targets at that live level.
And what then needs to happen to meet that quarter by the end of the month.
Exactly, and these days if you are using a CRM.
It's very easy.
And a lot of them, well its set up properly.
Well easy to track, if it's set up properly.
So what you are referencing now if sales funnel.
Right, so, how many leads have you got and that sort of thing and it's easy
In the older days it was all manual and a lot more difficult.
So now you have these.
You are right you have these technologies now to actually make this happen and it's like I go back to that driving that car again.
So when you know what you have achieved so far you also know which lever to pull or push to make sure that you reach that level so when you are driving a car if you know you need to reach somewhere point x by 6:00pm and you are still dawdling at B you know you got to step on it.
And not get bored and you need to make you for that.
Not get bored of course and you need to make up for that.
And we know the logic and it's not rocket science we know this and that's how the entire travel industry is.
All about so you make up on time and reach somewhere on time and yet we don't look at it like this in our business.
No, because so busy doing.
Sometimes and we are not taking.
You are not really focusing.
Strategic time kind of thing.
Exactly to see where we are going are we reaching there on time.
I mean hotels are funny as I remember in the operational sense they had what they called morning prayers they always a morning briefing at pretty much 9 O clock in the morning.
You would have the previous days results they were added to the month date with the month of date and the daily numbers you could have a picture contrast the ins budget to see where you are sitting and basically what was on the books and would you actually make this month or not.
So why a KPI is important really it's about when your performance is measured.
Okay your performance actually improves.
And it's not about the total profit and loss or the balance sheet.
All those kinds of financial kinds of reports.
In a way quiet heavy they have their own place and their importance the way you have the dashboard in your car and you have a couple of key indicators on there, when you are measuring those, your performance improves.
When you contrasting is last year last month budget whatever it happens.
Yeah, you bet.
But here is something that is really interesting and this is part of Pearson's
When performance is measured and reported back the rate of improvement accelerates.
Ooooo very nice.
So it's actually already powerful.
And it's kind of that feedback where you are at and how you going.
And may be not direct indicator what could go better but it gives you a place to focus.
So you can actually so like you say what which lever.
Lever I know lever lever
Exactly, it's not a lever.
It's like basel
Basel, excuse me cilantro.
Cilantro okay we digress.
Stop it stop it. So, it really is important to get that handle on your business so you are in fact looking through the wind screen.
The wind screen.
And you are not driving looking in the rear-view mirrors one hand on the steering wheel you are half looking over your shoulder no no no it's not about that at all.
Right, it's definitely on the road looking ahead and travelling in speed.
And then being able to then adjust as you need to.
Yeah, so really using the rear-view mirrors and the side mirrors as a reference points as guidance.
And so should they be no more than that because what lies ahead is more important what has happened is just a guide.
That's true that's true.
And guide where you are learning from that and you are still moving ahead guide not so much that as that dictates what happens ahead of you.
I could not agree more no could not agree more.
I would add something else and I know it's a topic in itself at some point or what I want to add over here is you were talking about that one thing that matters.
Tell me a little bit about that first.
Okay so you want to try and make it as simple as possible.
And we did speak about this where one pager.
With all your key bits and pieces you focuses for the quarters but the plan for the year you know so its easily communicateable with the rest of the team.
Communicable, that sounds interesting, so ya a one page plan.
With all the key sort of measures on it and the focus of the quarter or the year or whatever the case may be.
Communicated with the team.
Right at some point there is one measure and you know each business has their own particular measure that is important to them.
And good to great and Jim Collins did a lot of research and CVS the pharmacy in the US.
Had several different measures they went through and ended being if I remember rightly it was the total foot fall that came into a shop.
That is actually what was important.
I think originally, I thought it was revenue per customer or something.
But it was actually a foot
If they got the foot fall all the other bits and pieces would work.
You know so once they are in the store, they would buy and.
The customers would.
So the layout of the store was designed in a way to encourage.
While this thing but it was about foot fall.
That was a key thing if the foot fall wasn't there they knew that nothing well the revenues wouldn't be met and
that sort of stuff so it's really really interesting but for them that was the one thing.
Okay I want to pick something else that you said.
So, the foot fall was important.
Because when they know that foot fall is what they would like it to be then everything else works.
Yes, which also means other metrics that they have which might be revenue per customer or.
That's the one.
Or the total value of the sale or.
Each customer actually did then they could work out so how many people bought how many came into the shop and work out their sort of ratio all that sort of things.
But the one thing that would tell them whether it was going well or not was number of customers the walk ins.
So the foot fall.
The foot fall.
Yeah, so on that I also want to say or give you another example.
So, you have played tug of war right.
When you were in school or where ever yeah.
The usual birthday party thing that one.
That's the one so what is the a tug of war you have a big thick rope.
A big thick rope 10 people per team whatever and.
And you have a little flag and you have to get the flag passed a certain point and you drag the other team.
Drag the other team, so the purpose of rather the goal of that game is to bring down the other team so just to see who is more powerful.
Okay, so If you keep the same concept and change the rules of the game.
And in business you say you have one metric that matters.
So, that's important to have that one metric that matters and what of greater importance is to also have a balancing yet opposing and opposing yet balancing metric that matters.
I don't know what that means exactly.
Can you give me an example.
So, let's say for example the one goal for the next two quarters is to increase sales by 50%.
That is the one metric that you are measuring now.
Super, that's what we are all after
Yeah, that's what you are after. Who is keeping an eye on the balancing opposing yet balancing metric which is do you have strong enough operations do you have a strong infrastructure to handle those 50% extra sales that are going to come
I mean that's a question that you like to ask.
I would like to ask that to you.
If you had an order for half a million dirhams or dollars or.
Whatever the currency is could you meet that order.
Do you have capabilities built in to handle that order.
So you want to increase sales by 50%.
Is that the capability and other one could be you are making the sales but are you actually getting the cash.
Hmmm how you funding that growth.
Because you may have increase in sales you may have taken on more team you might have.
That's the one, who is paying for them.
So who is paying for it.
Very much so, so always have an opposing and a balancing metric.
And this is also something that during the Gazelles coaching we use very
Because that is one of the operations tools that we used.
It is very powerful.
And that means you are looking through your wind screen with 2020 vision.
That is true and why that came about because it was very often that you observe we know why that thought process is useful and important is because mostly when you say to founders in a coaching session or whatever when you say to founders so what is the goal that you are looking at? It's usually either more money, more profit, or more sales.
Because in a business which is usually firefighting what is more important what are they firefighting about it is either they are looking for more money or they are looking for the more sales to bring in that more money.
Very rarely and when they are looking at this there is very rarely somebody assigned to actually look at the opposing side so, what happens is that typical tough of war scenario you start bringing in those more sales so that the sales team gets really really annoyed and the rest of the team says I am bringing in all the sales so then who is handling them?
Hmm who is handling.
They are not been looked after.
So what are we doing about this or the finance team oh great you are bringing in more sales we delivering sending out all these emailing all these invoices who is actually collecting the cash who has that eye on the ball. So, it's always always useful so me as a coach for me that's very important when I hear a critical number or that one metric that matters to come up as the minute that somebody says cash or profit or sales more sales that is pinned to the white board for a while pinned to the cork board for a while till we address the opposing issues or the opposing numbers and identify which is that opposing and balancing critical number.
Very very important.
So while this could turn into another discussion I thought its useful right now to talk about this when you are looking at this leading and laggingindicators both the metrics need to have their individual leading and lagging
And they need to have the exactly opposing metrics as well.
And they need to have opposing metrics.
So, it's about absolistic view of the business.
That's what it is.
Very very important.
That's what it is.
Nice, I like it.
What are you asking our listeners to do with this information?
That is a very good question. It's actually a very simple one. Do you find in your business just go to the Facebook group and just tell us are you using forward looking or leading indicators.
Or are you focused on backward looking lagging indicators.
And if that was one that you could change in your business what would it
Ohhhh very nice I like that one that because that gives them a way forward.
Yeah and if you have the time have you ever considered an opposing metric.
Because that is a very interesting thing you brought up Warsha.
I would absolutely love to hear about this is this in itself when you guys are listening to us who have joined us today when you open this conversation up with the members of your core team to your next in line leadership team.
Just watch how many different ideas that will come through because each department will bring up their critical number as the most important balancing one.
And that's a great way to actually department to get department start talking to each other and this ideally needs to come through in your weekly meeting as well. So, open this conversation with your team and see what comes
Indeed and that is now how you go.
Brilliant so thank you very much for staying with us till the end.
This has been an interesting topic.
I think absolutely.
It really is.
Its knowing the ins and outs of your business.
That is true.
If you don't have the information you have got no idea.
All that oh my god so, hold that steering wheel
firmly know where you are driving know where you are looking.
And know which pedals to put
your foot on.
And go for it.
And drive safely.
Drive safely how a wonderful wonderful drive ahead.
Indeed, we will see you guys next time.
Thank you for joining us.
See ya bye.
Hey hey hey, thanks for joining us and listening right till the end.
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Fabulous, we will see you at our next show bye for now.