At this point every year, I love to take a moment and reflect on the first six months. Yes, I look at the typical dashboard metrics: revenue, profit, gross margin, customer growth, inventory etc. Those are the critical measures of health as it relates to the current state of my companies. I find however, that it is so very easy to become jaded as it relates to those figures. As much as the company may have grown, it could always have grown more. As much as I might like the gross margins, surely we could have increased it a percent or two. If the numbers aren’t what I want, then back to the problem solving drawing board to figure another approach. Such is the nature of building a business – it is never done, there is always more to do.
Don’t get me wrong. Positive trends in revenue and profit bring a smile to my face. They are the big items on the scorecard. However, I’ve found that I also smile when I consider the impact we have on the world around us simply by being open for business. Want another, slightly counter-intuitive measure of success? Look at your spend. This isn’t an investor metric. This is an impact metric. And yes, I’m a “feel good” capitalist! Why not? This is a “what difference are we making” metric. People love to talk about charitable gifts and I agree, they are very important. However, If you really want to see your immediate impact on the world around you, look at those columns that hold your payroll, taxes, cost of goods sold, rent, office supplies, etc. For example:
Payroll – the most obvious impact metric. How much money you are putting in the hands of your employees. Payroll goes right back into the economy through purchases, investment, taxes and charity. This money enables people to live and function in our society. It is foundational to everything else. If you’re bored and curious, find the P&L of a mid-sized company and look at their payroll numbers – it is very impressive.
Cost of Goods Sold – COGS indicates your spend on stuff. If you just look at what your business spent on raw materials it is absolutely heart-warming! That money went to other businesses like yours that are employing hard working people and spending money in the supply chain. And on and on and on.
How About Profit? Profit is a success measure for two reasons. Profit indicates both the health of your organization as well as what is left to go into income taxes (not to mention other taxes already included above), capital investment or “gasp!” money in your pocket…to in turn be spent on or invested in other things.
Starting to get the picture? The money spent by your business is feeding the system. As those zeros start to pile onto your numbers, it becomes very clear that the efforts of your operations are putting a lot back into the economy – into your community. No, you won’t win any awards for being the biggest spender and your investors might call a special meeting if that spending is out of line with expectations. However, you should realize that by showing up everyday to fight the good fight and keeping your business alive, you are making a huge difference to the people in your organization and your suppliers’ organizations as well as the communities in which they live. That sounds like success to me.
