TOT 001: Business Metrics That Matter

John Barker

July 23, 2023

It’s funny, not the haha type, when I’ve chatted with business owners about their companies how few can actually have a deeper understanding of how the business functions.

Many are quick to point out top-line revenue, some can describe their actual profit margin, and if I have a really advanced owner, they can discuss their client churn rate  (ie. how long a client stays a client).

Why as a technology professional would deeper financial understanding be important to me?

Why should you as a business owner need to cough up the info when discussing this with your technology members?

It all comes down to ensuring you have the right protections in place should something go really bad.

 Avoid this Critical Mistake

A critical mistake that I see technology practitioners make on a first meeting with a business owner is diving into the tactical, suite of tools, all of the fancy bells and whistles that their products and services can offer.

The entire time this non-technical business owner is having $$$ flash in their heads and not really having a clue how the technology solution will genuinely benefit them.

I like to understand how the business operates at a deeper level.

A fundamental rule when designing a technical solution is you aren’t going to spend more on the product than an asset is worth to produce it, or a new tool that won’t increase margins by some X amount.

The short answer is you aren’t going to spend $10 to protect $1

You aren’t going to spend $10 to make one in return

 Discussions Start Here

So what numbers start to make up a good baseline for a discussion?

• How much revenue and profit do you make per employee?
• How much is the hourly overhead cost of an employee?
• How much is the average hourly salary of a revenue-driving employee?
• What is the average hourly wage of an employee?
• How much revenue does your business make per 1-hour, 8 hr period, 24 hours, week, month?
  1. There is an important potential difference here for a business that only runs a 9-5 service vs one that functions 24 hours a day.
  2. The same goes for businesses that run 7 days a week vs 5 days a week
• How much total overhead expense do you have per hour/week/month/year?

Non Quantifiable

Not all measurements can be tracked so easily with numbers.

Two things not necessarily related to specific numbers would be

• What is the level of frustration or satisfaction with key pieces of technology?
• Do you sleep well at night knowing you have enough protection so the business wouldn’t grind to a stop if something terrible were to happen?

Hopefully, this puts you in a different frame of mind the next time your tech team says they need to spend some of your money.

Now you have something to start tracking against.

Feel free to play around with my Risk Calculator to start generating some raw numbers.

That’s all for today.

See you next week.