Don’t you love the medical dramas on TV…

You know - the ones where doctor’s dash around telling nurses to do “tox screens” and get the “blood gas” and the patients are connected to the latest in plasma screened computers which show their “vital signs”? Isn’t medical technology wonderful? They can measure all sorts of aspects of a person’s condition and carry out all kinds of tests to determine how well the patient is doing.

But you know it all still comes down to the fact that if someone has a dangerously high fever, if their breathing is irregular and if their pulse is weak then they have some fairly serious problems. If the paramedics, the ER staff and the surgeons don’t keep an eye on these indicators the patient will get worse, not better. And the “tools” needed to measure those things aren’t particularly complicated or sophisticated.

Same thing applies to a business. There are all sorts of systems – computerized and otherwise - which measure productivity in the plant, or efficiency in the warehouse or tell us who buys how many of what. We use tools to help us purchase better, forecast our sales more accurately (sometimes at least!), record the information we picked up on the last sales call, send out email blasts and do all sorts of marvelous things.

But we can be focusing on all of that while the business is slipping away from us. If we don’t know how much cash is in the Bank, or what the outstanding order situation looks like the company can become very sick, very quickly. We take our eyes off these things at our peril – particularly when the business is growing. And they’re not hard to measure.

Every business has some key indicators which directly address the health of the company – do we have enough cash for the next 90 days, is the order backlog increasing or decreasing, are Receivables coming in on time, is Inventory increasing and/or getting stale, are we close to capacity in the plant or should we be thinking of asking people to take voluntary time off? Figure out what the most important 3 or 4 are for your Company. Stay on top of them and you’ll stay out of trouble.

Your financial statements – income statement, balance sheet and cash flow statement - are undoubtedly the most important source of information about your company’s state of health. Given the variety of software packages which run on even the smallest computers there’s really no excuse for not being able to get those statements monthly. However, challenge yourself and your team; insist you have them early in the month. Getting the previous month’s statements after the fifteenth of the current month should be unacceptable. (I know someone who says it’s better to be pretty accurate and early rather than very accurate and too late.)

While those financials are accurate, they’re also historical. They tell you the facts – about a period that’s already gone. So, think also about the things that will give you advance warning of trouble – in the company and in the industry - and pinpoint the top 3 or 4 of those too.

Then have someone collect the data on those 6 or 8 important indicators and give it to you regularly. I’d suggest you look at them at least once a week. When I had what my wife refers to at cocktail parties as “regular jobs”, I used to look at them every day – particularly when there was a lot of change going on in the industry and in the company.

Watching the vital signs in your industry and in your company is one way to ensure that you perform well. Harold S. Geneen, who had his faults but who built ITT into a global powerhouse said “It is an immutable law in business that words are words, explanations are explanations, promises are promises, but only performance is reality.” Performance is one of the key elements of the 5”P” Process. To learn more go tohttp://www.profitpath.ca/services

© Copyright ProfitPATH, a division of JDS & Associates Inc., 2005

Before becoming CEO of the Canadian subsidiary of a multi-national corporation, Jim gained over 25 years’ business experience in major corporations (including subsidiaries of Pitney Bowes, Xerox and ITT) in Canada and Internationally. His orientation and expertise saw him spend much of his time starting and growing new or existing businesses. Since 1997, he has specialized in helping the owners of small and medium size enterprises, successfully achieve their growth objectives. Three of the companies with whom he has worked have received Business Achievement Awards. In 1995, Jim completed an MBA in the Executive Program at the University of Toronto, finishing on the Dean’s List. He also holds a Bachelor of Commerce degree from the University of South Africa. Visit Jim's web site http://profitpath.ca/ for more information.

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