How to Decide on a Critical Number for Your Business

How to decide on a critical number for your business and why you need one

I recently did a training inside of our Well-Oiled Operations program about the metrics you need to be tracking and why critical number is the most important. 

I had lots of questions about how to decide on the perfect critical number for your small business so I’m breaking it down here. 

What is a Critical Number? 

This clearly defined number allows everyone to be on the same page with your best sellers in order of importance. When the team is involved in setting and maintaining the critical number, they can take ownership of the actions that need to happen to move the needle in your business. This critical number represents the overall performance and long-term success of the business. It should feel like a stretch but also a doable goal.

How to Determine Your Critical Number 

With so many metrics to consider and track in your business, how do you decide what becomes your critical number? 

Here are some examples from big businesses to give you an idea of the difference between these numbers and other metrics like followers and open rates. 

Southwest Airlines, for example, has a company-wide motto of “Wheels Up”. Why? 

Because it doesn’t matter how many planes they have. Their critical number and their ability to stay in business relies on the amount of planes in the air. 

As another example, Tesla’s critical number is dependent on cars in driveways. Yes, they track production efficiency, they have metrics and KPI’s for their employees, I’m sure. But none of that matters if they don’t get enough vehicles sold and in people’s driveways. 

Inside Foot Traffic, our critical number is how many active members we have inside our mastermind programs. Sure, we care about followers and engagement. But the stability of the business relies on how many humans we bring into and retain within our programs. 

At my dance studios, we track units sold. Why? Because one dancer can take multiple classes. And we want them to do so! We don’t want to focus solely on students enrolled because we know that if we focus on one student taking more than one class, that’s less effort we need to put into marketing to a cold audience and it’s better for our retention rates. 

Hopefully those insights help you to understand why a critical number for your small business is so – well – critical. 

Consider two questions: 

  1. What are the factors related to your specific business model that are absolutely critical to ongoing success? 
  2. Are there challenges your business faces right now that need to be addressed? 

Factors to Consider 

In the next year, what is one thing…  

  • That will drastically move the needle on your business?  
  • You must achieve in order to maintain and improve profit margins?  
  • That will clearly define success for your business? 

Some examples:

  • Daily gross revenues
  • Members in a program 
  • Monthly recurring subscriptions 
  • Profit per sale  
  • Revenue per employee  

Keep these questions in mind when determining this metric:

  • Is it a stretch but also doable? 
  • When we meet this number will it significantly impact the success of the business? 
  • Will it make a financial impact? 
  • Will it impact brand awareness? 
  • Is it something team members can easily access and track on a regular basis? 

One more important point to make is that your entire team needs to be aware of it. We review our critical number everyday in our huddle. 

When the leadership team has awareness of this number and why it’s so important, it allows them to take ownership of reaching that goal. 

As I mentioned, this is something we go into with great detail inside our Well-Oiled Operations program. Small business owners enrolled in Well-Oiled Operations, have also received a handy cheat sheet to help them brainstorm and commit to a critical number. If you’re curious to learn more about this program specifically designed to help you streamline and scale your business to 7-figures and beyond, our coaches are available now to hop on a call.