Is running a business any different?  Is there a way to know if you win or lose each day?  Each week?  Each month?  Each year?  The answer to all of these questions is yes, and I write about how to accomplish this in my recent American Express OPEN Forum Article: 4 Reports that will Keep Your Business Thriving.

At 4:17am on Saturday, June 26th 2010 I saw the beginning of a lunar eclipse.  I was on an early-morning (or more like a middle of the night) hiking trip and we stopped to watch this rare occurrence (this was the first of only two this year).  What we initially saw was unimpressive.  At first, a dark cloud seemed to cover the upper arc of the moon.  The earth’s shadow was barely beginning to interfere with what appeared to otherwise be a full moon.

As the morning carried on, the eclipse continued to black-out a quarter and then an entire half of the moon.  I have never seen anything like this before – it was amazing to watch.  If I was not aware that we were expecting a lunar eclipse, I may not have even noticed this phenomenon.  I wondered how many people, not knowing it was supposed to be a full moon, might have looked at the moon in those early morning hours without realizing what they were seeing.

Then, I couldn’t help but relate this to one of the common business problems I see.  Many businesses will occasionally look at their numbers (in the form of financial statements or some other form of dashboard/KPI data) but the data and information they are looking at is not meaningful and is not helping them improve their business.  Why?  Because they lack context and comparison.  I took several “snapshots” of this event throughout the morning and ultimately I could comprehend what was happening.

Just as I grew to appreciate the eclipse as I saw it progress, others who perhaps only briefly looked at the moon once at any time that morning likely missed out on the eclipse altogether.  So, how do we solve this?  We have to put the numbers of the business into context against where we have been, where we are going, and what our competitors and industry are doing.

We refer to this as comparative analysis, and it works as simply as this.  If we generated $250,000 of sales this month, is that good or bad and what can we do to improve it?  First, we should understand what we have done in the past (last month, last year, same month last year, etc.) to understand if we are growing or shrinking.  Then we should compare it to what we were hoping to accomplish that month and if those sales are helping us to or hindering us from getting where we are headed.  Here’s an example: if we had sales in the same month of the prior year of $200,000, and last month we had sales of $230,000, and we were planning on $240,000 to achieve our goals for the year, then we can call $250,000 in sales a very good month.

While this revenue example may seem very simple and like most businesses do some type of similar analysis, we need to consider if they are doing the same analysis on their lead generation, conversions, operational efficiencies, and other financial metrics.  This will truly put the entire month into perspective in terms of our performance with one exception – industry benchmarks.

How are we doing relative to others in our industry?  As much as we may claim to have an innovative business model, the truth is that business models have been around a long time and there is very little innovation possible (although there is at least a little).  Even if we feel we are better than our competitors, we can still learn from their numbers and we can use them effectively as benchmarks for our own performance.

Are your numbers deceptive like a lunar eclipse?  Avoid the deception with comparative techniques that will make your numbers more meaningful.  Ultimately, the more meaningful your numbers are the better decisions you will be able to make, which will help you improve your cash flow and profitability!

In a recent training retreat I was reminded of this experience as well as the phrase that I kept playing over and over in my head to help me keep my cool while I was attacked: “Feedback is a gift!”  I honestly tried to appraise the situation and understand if there was some way I could learn and improve based on this feedback – the only way feedback can ever be a gift.  If you fail to try and learn and improve from it, then it will seldom add value to your life.

Once this man finished saying what he wanted to say, I communicated my surprise and I told him what I thought I might be able to do in the future to be better based on his feedback.  In fact, I swallowed my pride whole when I said: “Thank you for this feedback.”  My response completely dis-armed him and we finished with a healthy conversation wherein he admitted he was at fault and we resolved to move forward and make things better.

The point of the story is this: whether it is good or bad, feedback is a gift.  If the feedback is neutral or you receive no feedback at all, then you really don’t know where you stand and if you should be changing or improving something.  If you receive sincere positive feedback, then you will know you should do more of the same in the future.  If the feedback is negative, then you know what you should change in the future.  And, let it motivate you to make sure you never get that feedback again.

Either way, it is a gift of knowledge with which you can make the right decisions and take the right actions.  No feedback or insincere feedback (which, in my opinion, is the worst kind of feedback) is useless and should leave us wondering how we are actually doing.

When running a business, feedback should be the number one source of inputs you consider when crafting your strategic and tactical plan to build a successful enterprise.  You will take in qualitative feedback from conversations with and surveys of customers, employees, contractors, suppliers, and vendors.  You need to process quantitative feedback in the form of monthly financial statements, budget vs. actual analysis, daily and weekly dashboards, cash flow projections, and so much more.  Not receiving this information, whether good or bad, is crippling – you have no idea if you are doing well or n0t.

In my experience, the best entrepreneurs and CEOs are those who recognize that feedback is a gift.  They become empowered with real and actionable information from all of the appropriate sources.

So, why don’t many people view feedback as a gift?  Because it is painful.  It is making yourself vulnerable and exposing your weaknesses and strengths to others, and sometimes they will come at you with more negative than you think you can handle.  But if you truly consider feedback as the gift that it is, it will always work to your ultimate benefit.

After writing and article titled 20 Indicators Your Financials are Wrong for the American Express OPEN Forum, I received a lot of interesting feedback.  The main issue, however, remains unchanged.  Business owners and managers need information in their hands that is accurate and timely so they can run and improve their business.  Reporting to banks and others should be secondary to getting effective information in the hands of those who run the business.

Feel free to take a look at the article to learn about the 20 most common problems with financial statement accuracy as well as some solutions to those problems.

I hope you enjoy the read.  If you do, feel free to share it or Retweet it.