The car dashboard has been getting more complex and computerized in the last few years. When we purchased a Honda Odyssey for our large family, I had to figure out where to look. There were symbols, screens, and alerts for everything. It tells us when we need an oil change and when one of our tires is low. The lights come on when it gets dark, and a gas light comes on when we are nearly out of gas. My car even beeps when closing in too fast toward another car or going over the line.
In business, we fear failure. We fear losing clients or not having enough cash for payroll. We might fear paying taxes or not paying vendors and suppliers which affects our ability to do business. What if there was a way to alert us of potential failures? Just like when we are about out of gas or have low tires, we get notified when we are low on cash or maybe low on a product or inventory. It all depends on what is important in your business. Obviously, gas, tires, and oil are important for cars. In business, revenue, expenses, cash, and margins are important. But we need a dashboard to help us understand an issue that may be on the horizon so we can adjust quickly before we have a blowout or our car ends up in the shop.
Let’s go through 5 ways that a good dashboard can help any business.
We have goals for revenue, profit, new clients, and margin. No matter what the goals are, we should regularly review actual results to these goals. I encourage at least a monthly review for any business. The dashboard will show you when you are off track and then you can drill further to solve the problem before it is too late. It may be stressful when you are behind your goal, so I encourage you not to get angry or too emotional. Just think about what you are going to do this week to get back on track. Focus on your actions.
Sometimes it is better to track the actions because they are more inside your control. You can track the number of phone calls, lunches, or proposals.
What if you could tell there was going to be an issue before it happened? A good dashboard will give you red flags so you can adjust. Wouldn’t you sleep better at night knowing that your business numbers were trending in the right direction? Fear of the unknown is one of the strongest fears we have in business. Now, I am not saying that a dashboard will tell you everything. The further out you go in time, the more unknown everything is. You just want to create a dashboard that gives you a head start or potential issues.
Have you ever felt like something was wrong but you didn’t know where the problem was coming from? Your bank account is telling you that you are running out of cash, but you don’t know where to look. A good dashboard will quickly show you the area that requires more digging. One of my clients was not sure where the cash was going in his business, so we looked at a simple report that showed the cash flow details and quickly discovered the answer.
Have you ever been lost in the details of a project? Then you took a break and stepped back and you saw the problem. It is easy to get lost in the weeds in a small business. Sometimes business owners are wearing multiple hats.
If you look at a weather radar, you may see rain all around your area. The next step would be to scroll out and see a larger area to understand how long the rain is going to last.
The dashboard provides you with a 30,000-foot view so you can more quickly make decisions on the most important priorities.
When you first start reviewing a dashboard, you might not know what the most important metrics for your business are. The more you review how your revenue, profit, and cash flow are related in your business, you will understand the financial aspects of your business better. Some of this comes with experience. You will begin to see trends in your business based on seasonality and marketing. These will be helpful to forecast the future.
I tend to use weather examples because I like the weather. I read the forecast discussion that the meteorologists write for their forecast reasoning. They are always discussing different computer models which are based on historical information from over a hundred years of data. The amount of data is continually increasing which helps them improve their forecast. I know they have a long way to go, but they have improved their short-term forecasts in the last few decades.
The same is true for your business. The more data you have on your business, the better you understand how to increase revenue and profits at a faster pace.
So what do you put in your dashboard? There are hundreds of metrics you could look at but who has that kind of time. I will simplify this for you. Here are some ideas:
Important numbers to compare to Goal/Budget, Last Month, and Last Year
Keep it Simple
Dashboards can get very complex with many ratios and trends that can be tracked. Just like when I first started driving the Odyssey, I didn’t know where to look. It was almost dangerous because I was taking my eyes off the road too long. Business Dashboards are meant to be easy to read and simple to use for decision making. I would suggest an easy dashboard with less than 10 metrics and less than 5 graphs. Sometimes just one metric can tell the whole story better than anything.
The key is to take the time to review these numbers and then get back to work making your business dreams a reality.