If You Can Measure It, You Can Manage ItBy Scott Dickes
The title of this blog post is most commonly attributed to management guru, Peter Drucker. I saw it again recently in a venture capitalist's blog post. I think it captures the spirit of how Hadley Capital works with its portfolio companies. After acquiring a business we work with business owners to use good data to manage their business. This usually occurs in three steps:
- Getting The Right Data
Sometimes a business doesn't have the right systems in place to get good data. For example, the current financial system might not allow a company to see their margins by product or they might not be able to see margin by customer. Getting this data is really important to managing your business effectively. It allows business to make the right decisions about what products to sell and which customers to focus on. At Hadley Capital, we help our portfolio companies get the right systems in place so they can get good data about their business.
- Identifying Opportunities
Once we have good data it's important to know what to measure it against. If a company's gross margin for a certain product is 30%, is that good or bad for your industry? Is margin improvement a real opportunity or should we focus on improving something else in your business? Hadley Capital helps our portfolio companies answer these questions and helps them focus on the right opportunities to improve their business.
- Consistent and Timely Reporting
After the business owner has identified opportunities a big part of managing a business effectively is measuring data on a consistent basis. A lot of small business owners have trouble making timely financial reporting a priority. As a result, at any given time they might not know the details on how their business is performing. At Hadley Capital we make sure our portfolio companies have the resources and personnel to provide accurate, consistent, and timely reporting. For example, if the business thinks it can improve its gross margin by 10% by making some changes it's important to see how those changes are affecting the business. By getting good data on a consistent basis the business can see very quickly how the changes that are being made are affecting performance of the business.
We find the majority of small business just don't have the time or resources to get good data and manage against it. Most of the businesses we work with want to do it, but they just never had the time or resources to get it done. It is a rewarding experience when we help our portfolio companies get where they want to go.