You’re Measuring the Wrong Things13th October 2017
I can guarantee that you record how much money your business makes each day. I’m fairly certain that you also note the number of covers you accept and some a system spits out the spend per head.
Cool. They’re not useless – revenue pays the bills – but in most cases, they aren’t what you should be focusing on. “But wait, you handsome, crazy bastard you, what else should I be focusing on?” I hear you cry.
Money is a By-product
Money matters. But nobody pays you money just because it’s burning a hole in their pocket. Revenue might be the be-all-and-end-all for the owner, but it’s your level of service, quality of the product or the experience you offer that will ensure people keep coming back and filling the till.
What are you Trying to Achieve?
– One, I can guarantee you 50 paying customers tonight.
– Two, I can guarantee you one more customer each night you’re open for the next 100 days.
Yeah, so obviously you take the second choice and enquire how I gained these magical powers. Point being, you’re not building a business to perform today, you’re building a business to be successful day after day after day.
So what matters more: how much money you made last night or how many of those guests will come back again? Should you be focusing on how many covers you served on Tuesday lunch, or how much people enjoyed their meal enough to tell their friends about it?
So What About Spend Per Head?
Spend per head – like most metrics that combine a couple of other stats – can actually be quite useful. It’s a gauge of time spent, menu items tried and dishes & drinks re-ordered.
And that’s the problem. Spend per head tells you what people did, not why they did it. If you don’t know why the spend is up or down, what can you do about it?
And Year-On-Year Revenue?
Valid point. The difference in year-on-year performance is an indicator of behaviour, which is the kind of metric that leads to smart decision-making.
If you made a lot more money on this day last year, you can start to investigate why. It could have been that the weather was better, or there was a major local event. It could be because you’re just not quite as great as you once were (eek). Realising the trend is the first step to finding the information that might just save your business.
What Should you Be Measuring Instead?
Take a step back. What is it you are trying to find out?
If it’s why people come back (or don’t) then you can zero in on repeat customers and ask (crazy but it works), review their receipts to see what they order, what time and day they come in and how long they stay.
Any variances between them and your regular customer base should lead you to the answer. Maybe you want to know what you can do to retain your best team members. Do you think there is a correlation between how often someone asks to leave their shift early and dissatisfaction at work? I bet there is.
Be Careful What you Measure
Whatever you start measuring – and I hope you don’t just stare at revenue, covers and spend per head after reading this – be sure to focus on whatever it is that you actually want to find out.
It can be tempting to start measuring everything, but that is never a good use of time. And many-a-company has fallen foul of following the wrong metric; trying to become more efficient or smarter in an area that really doesn’t matter all that much.
Remember, whatever you measure is what you will action.