THE BLOG
06/17/2014 02:50 pm ET Updated Aug 17, 2014

To Win in Business, Keep Score

If you're an entrepreneur, especially if you own and operate a small business, chances are you may feel uneasy when you hear the phrase, "to know your business you need to know your numbers."

Part of the issue here is that the term "numbers" is both ambiguous and unclear. You've probably asked yourself "What numbers? What should I be tracking? What will give me an accurate portrait of the health of my business? What will help me project into the future?"

It's daunting, I know. As a result the whole concept of knowing and tracking numbers usually gets set aside or put on the back burner while we work on what is urgent and necessary in our business today. In fact, most small business owners understand their success though one number: ATM -- by that I mean they go to the ATM, look at the receipt and see if they have money in the bank!

This is like playing a game that determines your income without a scoreboard!

It's a common challenge, and one that even the most successful entrepreneurs have faced at one point or another. At our company, we have a ton of clients who start with us in exactly this situation.

You have a lot going on, much is expected of an entrepreneur, and more importantly you expect even more from yourself. However, I also know what it is like to work, and what it is like to work with leverage, and quite simply, knowing what is important in your business and measuring your success will create leverage.

At least part of the issue entrepreneurs have with numbers is the effort tracking them takes; it's a commitment and requires focus. If you've never tracked numbers before, the effect of spending time, effort and focus tracking numbers can seem hazy at best. On the other hand, not tracking anything is like playing a game without a scoreboard: you'll never know if you're winning or losing.

I believe every business should have a number everyone knows and is pushing towards, pursuing and focused on. And the good news is that you really only need one.

We call it the Critical Number.

The critical number in a business is the big number that can be measured and tracked and will drive the businesses success. There are usually three to five important numbers or measurements in any business, but the critical number is the one that matters most. It will also vary from business to business. It's the number that matters to you.

Here are a few quick pointers for defining and capitalizing on your critical number:
  • The number should represent what drives your business. Ask yourself what the goal of you business is, and why. Every entrepreneur should be able to answer this. If you don't know why you're in business, you have some reevaluating to do.
  • Track it daily. Even if it's a number that doesn't change often. The fact that it doesn't change will drive you to figure out ways to make it change.
  • Share and celebrate it with everyone. If people know your number, they can hold you accountable to it, and also reinforce your success.

Here's a quick example from our own team:

In our real estate training organization we sold a certification that helped agents do more business, to drive our growth we tracked certified members. What mattered to us weren't sales, but how many people finished our course and became members. We didn't just track this, we posted it in our office, shared it every day in our daily huddle, took photos of our team at each major milestone and even had shirts made!

And there are a ton of examples from across the business world:
For Tesla it is how many Model Ss are delivered, not just sold. Early on in the company's history, they didn't have a sales issue but a delivery issue. In Europe, a market that just opened for Tesla, they are counting just their first 100 deliveries and making it news.

For Southwest Airlines it is how many planes they can keep in the air. They know that if they're successfully filling planes and earning new routes through customers, then they are winning.

So, what is the critical number in your business?

If you're an auto-repair store, it may be how many cars are trusted to you by clients each month. If you're an accountant, maybe it's how many businesses you do taxes for. If you're a yoga studio, it could be how many total people attend classes. If your company builds apps, it might be how many downloads you have.

When a business has Critical Number creates a target, a scoreboard and a win for you and your team to focus on. Here is a video we did on this subject if you would like further detail.

By starting with a critical number, we create a scoreboard.

With a scoreboard your business can win.

Alex Charfen is the CEO of the Charfen Institute.