One Level Deeper
I spent time with the owners of two different retail companies this week, both with parallel through-lines. One company has annual revenue of approximately $1M, and the other about $6M. Both companies have great month-by-month revenue data that gives them a general understanding of growth over time. However, revenue alone doesn't tell the full story; it merely offers a glimpse into the truth.
Many times, we need to look one level deeper. So often in our lives, we have just enough info to be dangerous, but not enough to truly move the needle.
Back to the two companies above. Month-by-month revenue numbers are tremendously important, but looking one level deeper will tell a much different, clearer story. Here are the pieces of information we need:
# of customers
# of transactions
Average ticket size
Let's say revenue grew 10% year over year. Why? Do they have more customers? Are their existing customers visiting more frequently? Are their customers spending more money per visit? Maybe they are losing customers, but their existing customers are becoming more loyal and visiting more often. Maybe many new customers are coming through the doors, but not returning as often. Maybe they aren't getting more customers and their existing customers have the same purchasing behavior, but revenue is increasing solely because of price increases.
These are the three legs of the proverbial revenue stool. Without understanding how these three metrics fit together, we can't figure out how our business is or isn't growing. We need to look one level deeper.
This applies to so many aspects of our lives. Every time we think we have "enough" insight, there's typically a deeper level that would unlock our ability to move the needle in our endeavors. I just met with a young man yesterday who has some big dreams, but he doesn't know how to unlock them. He's making progress, but not enough progress. After looking at a few of his key personal finance metrics and pushing one level deeper, we uncovered a few critically important details of his situation. Doing so fundamentally transformed his understanding of what can and should be done in the season ahead. It was so awesome to see the light bulb turn on over his head.
Look one level deeper. We don't have to obsess about everything or become extraordinarily myopic, but just giving it a little extra oomph can help so much. Happy hunting!
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