Most businesses track too many numbers and focus on none of them.
Revenue. Profit. Cash. Debtors. Leads. Wages. Jobs. Utilisation. Stock. Margins.
All very important. But if I asked you to choose one number your entire business should obsess over right now, could you?
That’s your Critical Number.
It’s the number that, if you ignore it, could significantly hurt your business. It keeps you awake. Improve it, and the impact should ripple through the business.
And here’s the important bit: your Critical Number won’t stay the same forever.
A rapidly growing business might choose cash reserves because growth is swallowing cash faster than it can generate it.
A service business with plenty of work but disappointing profits might choose gross profit percentage.
A business struggling to collect money might choose debtor days.
A NDIS provider could focus on labour costs as a percentage of revenue. A trades business might focus on gross profit per job. A professional services firm could choose team utilisation or billable revenue.
So how do you choose yours?
Ask: What single financial result, if we don’t improve it over the next 90 days, will hurt us most?
Then make it visible.
Put it on the wall. Put it in your weekly meeting. Set a target. Track it. Talk about it.
Most importantly, make sure everyone understands how they can influence it.
There’s no point telling your team gross profit is the Critical Number if they have no idea what improves it. Show them the drivers: pricing, purchasing, productivity, overtime, waste, rework, rostering or job management.
Your Critical Number should keep everyone focused on the fundamentals: making money and generating cash.
Twenty KPIs can create noise.
One Critical Number can create action.
So, what number does your business need to obsess over for the next 90 days?