Assessment for Managing by the Numbers by Will Phillips The core purpose of any business is to find a need in customers and to fill it. Profit is a measure of the success of this purpose. REX strongly believes that the central commitment necessary to make a regular profit is to be PROFIT DRIVEN. Too many businesses focus on operating well and are PROFIT DRIFTING not DRIVEN. The statements below reflect decisions, systems and attitudes necessary for a business to be profit driven. Many businesses coast during the good times; others focus on operating well on a day to day basis; both may neglect driving for profit. Being profitable is not a guarantee that the business is designed to be PROFIT DRIVEN. The essential methods and tools for being a profit driven business are explained in Managing by the Numbers, a 140 page work book by WIll Phillips. As a REX Roundtable member you should have received a copy of this in January 2010. The book includes a 90 minute DVD presentation by Will which is an overview of Managing By The Numbers. This book covers the ten elements that together enable you to be a profit driven business. When a business starts, the owner focuses on having enough cash at the end of the month to pay vendors and bills and maybe them self. As the business succeeds the owner switches focus to revenue/growth. Of course the owner wants a profit, but rarely does the owner focus on driving profit if the business is making enough for the owner to live well enough. This means the owner is likely to work harder and not reap the benefits of working smarter. A profit driven business makes more profit with less work. The very best assessment will occur when your direct reports respond to these statements as well as you the owner. Compile all the answer onto one assessment and send it to REX. We will then analyze your responses and tell you which of the ten elements of Managing by the Numbers you are strong in and which need further development. Please print this page and CIRCLE the response to the left of each statement that corresponds to one of the following: 4 Strongly Agree 3 Agree 2 Neutral 1 Disagree 0 Strongly Disagree 1   4  3  2  1  0   We have a profit plan—i.e. set goals for revenue, costs and profit for the year. 2   4  3  2  1  0   The above goals reflect a good increase over last year. 3   4  3  2  1  0   The above profit goal allows enough profit for adequate capital reinvestment in the business. 4   4  3  2  1  0   The above profit goal allows enough profit for significant profit sharing/raises to employees.. 5   4  3  2  1  0   The above goals (#1) include an aggressive commitment to cost control/reduction. 6   4  3  2  1  0   Our financial goals are broken out into monthly and weekly goals. 7   4  3  2  1  0   Our monthly and weekly financial goals are broken down into each department's contribution. 8   4  3  2  1  0   Each key manager knows his or her area's contribution to the overall financial goals each month. 9   4  3  2  1  0   All key managers are committed to the financial goals and their part of the goals. 10   4  3  2  1  0   Actual numbers are accurately measured and reported each month (week?) 11   4  3  2  1  0   Actual numbers are reported within five days after the end of the month. 12   4  3  2  1  0   All key managers know the gap between actual and planned for the company and their area. 13   4  3  2  1  0   We know the profitability of each program and service offered. 14   4  3  2  1  0   All key managers regularly problem solve to close gaps between actual and desired results. 15   4  3  2  1  0   Key manager meetings are regularly held which publicly acknowledge gaps. 16   4  3  2  1  0   Monthly, key manager meetings solve problems to close gaps. 17   4  3  2  1  0   When it looks like we will not achieve financial goals, we do not lower the goals. 18   4  3  2  1  0   We aggressively identify gaps very early in the year and work to close them. 19   4  3  2  1  0   Everyone knows how important the financial goals are. 20   4  3  2  1  0   We have an emergency plan in place if there are significant shortfalls. 21   4  3  2  1  0   Our annual profit plan does not depend on the economy recovering or growing. 22   4  3  2  1  0   Our annual profit plan is not dependent on hiring people who are not here at the start of the year. 23   4  3  2  1  0   Key managers are strongly motivated to achieve our profit plan. 24   4  3  2  1  0   We have a track record of achieving our profit plans. 25   4  3  2  1  0   We track our business by product lines, markets or customers to see how each performs. 26   4  3  2  1  0   We benchmark against industry standards (rmahq.org and our industry association). 27   4  3  2  1  0   We track and manage gross margin. 28   4  3  2  1  0   We have an accurate costing system so we know the cost of each program. 29   4  3  2  1  0   Our leader(s) behavior shows us the importance of managing by the numbers. 30   4  3  2  1  0   We use cash flow projections so we know when cash comes in, where it goes and what is on hand. 31   4  3  2  1  0   Working capital needs are forecast and capital is arranged well ahead of needs. 32   4  3  2  1  0   EBITDA is regularly increasing. 33   4  3  2  1  0   Score cards and key indicators exist for the overall company and each function/department. 34   4  3  2  1  0   Each manager has taken responsibility for one or more line items. 35   4  3  2  1  0   Each line item has a name next to it who is responsible for managing that number. 36   4  3  2  1  0   Tracking monthly average new sales, average total sale for new customers, and to current customers. 37   4  3  2  1  0   Every staff member is aware how their behavior drives revenue up or down. 38   4  3  2  1  0   Every staff member is aware how their behavior drives profits up or down. 39   4  3  2  1  0   Customer loyalty goals and actuals are tracked monthly, ideally by cohorts. 40   4  3  2  1  0   Blaming and finger pointing are replaced by responsibility and problem solving. SCORING All up your score and post it here___________. Scores above 150 (90%) show a strong profit driven business. Scores below 130(80%) show weakness in being profit driven. Below 110 (70%) and the weakness is significant. Scores below 120 reflect a business that is not profit driven. If the economy and other uncontrollable factors are in alignment, the business may be making a profit, but the business is not being driven towards regular profits. This may result in a nice income for the owner(s) but marginal incomes/benefits for staff. If the economy or the business environment sours or shifts, a profitable business often becomes unprofitable, whereas a PROFIT DRIVEN business, remains profitable. Review the above 40 statements scored below 4 to help you generate an action plan for profit. Choose one to three areas to work on in the next three months. When they are in place return to this assessment and choose the next areas to develop. Moving from profit drifting to profit driven often takes three years of concerted effort. BEWARE: Being profit driven is not sufficient only necessary, it is also critical that you pay attention to all thirteen elements in the REX Leadership Agenda. ACTIONS to Drive Profitability (What Result?, How Achieved?, By When,?) If you choose No Action? Read The 'E Myth' by Michael Gerber to find out the challenges your entrepreneurial business may face in the future.