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Finance Learning Lab – Micro Course on Small Business Bookkeeping and Finance (Part 4 of 10)

So in this lesson what we’re going to talk about is how important it is for you to have a dashboard. A dashboard is basically just a fancy way of saying you’re the pilot running this airplane but you need certain pieces of information to gauge how you’re doing. Are you on course or off course? Where are you at? What information are you going to regularly look at and monitor to give yourself some sense of comfort or to course correct.

A big trap that sometimes business owners fall into is we really focus on monitoring the statistics that are immediately in front of us instead of monitoring the statistics that really matter. So what do I mean by that? Well most of the large social media platforms on there have really figured out this whole idea of metrics. So you can go into Facebook or Instagram or Linkedin or any of these different networks and they’re going to give you stats like how many engagements or how many likes you acquire. But is that information ultimately the information that you should be looking at and driving for the profitability of your business? They may be leading indicators but if those leading indicators don’t actually eventually convert into sales then you’re falling into the trap of analyzing numbers just because they’re in front of you instead of the numbers that ultimately matter. And it’s going to be very deceptively easy to fall into this lull of feeling like you’re monitoring the progress of your business based on followers and likes. You cannot go to the store and buy something by saying, “Yeah but I’ve got 40 likes on a particular thing”. You can’t buy in likes. So you need that same exercise of monitoring how you’re doing and setting up a dashboard of what exactly am you’re going to monitor and actually looking at that. But that information is not going to just create itself. So if you’re working with someone they may actually produce that information for you. If you’re working on your own, then you’re going to want to be able to include as part of your review, the time it’s going to take for you to pull that information together.

So, what is that information? The reality is that information is going to look different depending on what your business model is. So your business model might have very different leading and lagging indicators. Usually you’re going to want to look at what gives you a really good prediction that you are going to be making money in a week or in a month,. You’re going to want to be pulling that information together but tying it into your financials.

So let’s take a look at an example. Let’s say that you are a search engine optimization consultant. So you help different companies with their SEO work. Well one of your leading indicators is going to be the number of people reaching out and contacting you. You know that a certain number of people may be filling out your lead magnet or a certain number of people sending emails or phone calls coming in, that some percentage of those people are going to convert into paying customers. But they might need a little bit of time. Or another factor might be how many proposals you’ve sent out or how many quotes you’ve issued. That can give you a pretty decent indicator that you have a good chance that a certain amount of money or a certain amount of revenue is going to be coming in. So you’re going to want to be able to kind of look at those leading indicators but don’t fool yourself. Make sure that you’re also picking up the lagging indicators so that you’re actually seeing dollars in the door, how much is truly coming in and how much is coming in on a per day basis or a per effort basis.

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