You Have to Measure to Win

You have to measure if you want to grow. The results you have now will tell you what’s working, and the results you don’t have will make obvious what is absent. But you’re a small-business owner, and you’re already overwhelmed; measuring can’t be your full-time job. It doesn’t have to be. A system I recommend is called the “Thumbprint.” It’s just three groups of numbers:

  • Sales — We usually talk about monthly sales and compare them to last year
  • ACT – The amount of an average customer transaction
  • TGM – Total Gross Margin

ACT and TGM should both be measured historically over 12 months or as many months as you’ve been in business. There are only two ways to grow sales: either get more customers or convince your existing customers to spend more. To calculate ACT, divide sales by transactions. Both ways to grow sales are accounted for in that one simple number. There are also only two ways to grow margin: raise prices or lower costs. TGM is the money you have after you subtract any costs that are directly related to making a sale, so both sides of that equation are represented in that number as well. This is an accurate way for franchisees across the system to compare how they’re the same, how they’re different, who is having success and who needs a hand. This quick Thumbprint allows two small-business owners from completely different businesses and regions to relate to and learn from each other. In turn, this multiplies opportunities to learn from each other.