Knowing Your Numbers
The only way to know for sure that things are getting better is by measuring performance with numbers. In sport, coaches, the media and players all use numbers to measure how well someone played or where they were lacking in their performance. They measure passes completed, tackles made, shots taken, goals scored and so on and so on. Without these vital statistics and numbers, coaches and players would only be guessing on performance, they would just be reviewing players and teams on only what they were able to see through the game.
It is the same in business. I often sit down with a business owner and ask him or her about their KPI’s (statistics for business). It astonishes me how many clients, in particular hospitality clients, don’t know the figures of their business. When I ask “How much did it cost for stock last month?” their responses would often be “around $4,000 to $5,000”. This just not good enough! Was it 4,000 or 5,000? This conversation happened with one of my longest standing clients. He was in the pizza game and thought that he was running a pretty lean ship, in fairness he was.
He had three stores and they were all turning a profit, so he was happy with what he was spending on stock every week, but I was just not happy with that response so I decided to question him about it a little more. “If stock is between 4k and 5k a week for each store, but your sales are pretty consistent, then we have a problem” I said to him. “Why?” he asked. “I’m making good money and you can’t really control stock exactly because different pizza makers make pizza with different amount of ingredients, you can’t all pick up the same amount of cheese, It’s impossible” he said to me. So I told him that he owed it to the business to make sure he had greater control in the stock department and that I would be able to put better systems in place to make sure that the pizzas where all consistently made with the appropriate stock level.
I decided to go into the shop one day with my client and get him to make each pizza on the menu. Whilst he made each pizza I was able to measure the amount of ingredients he put on each pizza and record it on a spreadsheet. After a couple of hours we knew exactly the cost of each pizza. We then looked at his sales for the last 4 months and worked out that with the 5% wastage, he should be spending 3,500 a week on stock. 3,500 would mean he could save at least $500 per week per store, that’s an annual saving of $78,000.
My client then asked me how on Earth we were going to get all the pizza makers to use the same amount of ingredients as he did. Should we get them all trained? But would that guarantee they would be consistent with ingredients? The answer was something that was never done before in a pizza store, something that you would never get from any amount of training in the industry. We had to think outside the box and be radical with our views.
We decided that every pizza could be consistent if we were able to measure each ingredient as we made it, but we knew that that would take too long and slow down the pizza makers. So we gave them coloured cups, blue was 100g, red was 150g, yellow was 200g etc. Then we changed the POS system so that when an order was placed, the pizza makers would have a receipt come out on their end with the pizza name, and each ingredient by colour. So if they had a margarita pizza in the order, the receipt would say one scoop of tomato paste, and one yellow cup of cheese. That way they would never put too much or too little cheese. The customers got consistent pizzas no matter who was making them, and we spent less money on stock.
By knowing what his key numbers were, my client had a reference point and together with my help we were able to improve his business in both dollar value and customer satisfaction. If I could make only one recommendation to business owners, it would be to know your numbers, because the numbers never lie.