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What Number is Your Blind Spot?

We all know the dangers of a blind spot while driving down the road, where the vehicle that we cannot see could be lurking, and leading to a possible accident. Thankfully for our safety on the roads, today’s technology has compensated for the blind spots in our vehicles while driving. However, on the winding road of entrepreneurship, blind spots are still much more common than we would like. There is a number in your business right now that is a blind spot, and that blind spot could be doing damage right under your nose. What number is it? And what should you do about it?

What is it?

There is no magic uniform technology to expose the blind spot in your business. Like the human body, your business is unique – how it operates, its resources, its constraints and its culture. To narrow down that blind spot number, what is driving your business today? What are you susceptible to? What has changed in the market that is affecting you? Changes in collections can have a material impact on a company’s cash position. Could your days sales outstanding (DSO) be that number? Gage your team, what are they seeing? What is keeping them up at night? Are they seeing something on the ground floor? For example, even though sales are still increasing, perhaps fewer deals are entering the funnel despite sales efforts. Are you watching trends of how many new opportunities are being generated each month? Could this pending slowdown catch you by surprise? Is the team as efficient as they had been in the past? Revenue per FTE or revenue per sales or other department FTE can be a key indicator. Is this a sign of trouble? Another great way to look at data is in rolling 3 month averages. This smooths out the impact of one month, good or bad. Could a rolling three month trend tell you that your sustained growth rate is less than you think?

How do you monitor it?

First off, how good is your data? Is it reliable? Is it timely? You must start there. A blind spot is problematic, but a false positive or false negative based on bad information could be just as dangerous, creating a false sense of security or unneeded panic. Look at trending. And understand what is driving its movements. If DSO is that blind spot and it is deteriorating over time, is it uniform across all customers? Just a few large ones? The answer to that question will dictate the nature of the response. Empower the team to understand their role in improving the results.

How do you mitigate future blind spots?

Again, your team can be a great weapon here. Encourage their curiosity and candor to actively identify and raise flags to management at any time. Leverage the network of partners around your business. Your CPA firm and lender, among others, can provide a frame of reference of what is happening in the market and to companies in and around your industry. This can provide context, and a head start that allows you then to dig into your business.

Find that number in your business. Reflect, dig into the numbers behind the numbers, and get your team engaged. It is imperative that you can peer through the noise to accurately monitor this key metric and the information beneath it. Continue to be vigilant as new blind spots can emerge. By identifying and monitoring the right numbers, you can create your own early detection system, just like the blind spot warning system in your car. Don’t let that accident sneak up on your business.

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