Economic Denominator

In some businesses, the economic denominator is the number of prospects who phoned for further information. As a result of advertising and promotion activities in other businesses, it is the number of prospective customers who walk in the door seeking information in order to decide whether or not to buy the product or service being offered. The economic denominator can be the number of sales that the company makes each day or the average size of the sales that are made on a daily basis.

What is your economic denominator? This is like the bullseye in the target that you were aiming at. What is the one number that more than anything else indicates the financial health of your business? Each person in your business should have an economic denominator as well. He or she should have a key success indicator or metric to determine whether or not he or she is doing the job in an excellent fashion. This number should be clear, visible, and objective. Everyone should know what it is and be able to determine whether or not he or she is reaching that number regularly. This is the answer to the question: How do I measure success at my job?

In business, there are three basic activities:

• Market and sell the product or service
• Produce and deliver the product or service that you have sold
• Manage and administer the money and activities of your business

Whenever a company runs into trouble, it is because of a problem in one or more of these three critical areas. At the beginning of this module, I said that the highest-paid work in business is thinking your ability to gather the information necessary to create a complete business plan and to think through the critical issues of your business will have a greater consequence in determining your success or failure than any other factor.