Is There a T.I.G.E.R. in Your Office? 5 Things Your Business Dashboard Must Do

Powerful Business Dashboards are TIGERs

There are hundreds of ways to look our business – we can spend hours staring at financial statements and ratios. But financial statements alone won’t help us make progress…what an entrepreneur really needs is a map.

A great “business dashboard” can be that map, showing us not just where we are, but also where we are going. (Financial statements tell us only where we’ve already been!)

Like the dashboard in a car, a business dashboard is a tool that tells us how things are going.  If we are worried about the engine overheating, we have a temperature gauge.  If we want to know whether we are likely to get a speeding ticket, we glance at the speedometer. All the car’s vital systems can be displayed on the dashboard – oil, water, gasoline, rpm, distance and even the direction of travel. A well-constructed business dashboard can likewise tell us a great deal about the function and health of our business.

Business Dashboard Basics
A dashboard is the perfect way to report financial and operational results over time.  There’s no need to spend thousands on complex dashboard software, a simple dashboard can be nothing more than a couple of bar charts. The point of a great dashboard is not to introduce complexity or confusion, but rather to show the key metrics in a business and how those metrics change over time.

Make Your Dashboard a TIGER
There are five rules to creating a great dashboard, which are easy to remember with the word TIGER:

  • Time – update regularly & show all results over several time periods
  •  Impact – the metrics must impact (and be impacted by) management decisions
  • Goals – compare results to a stated business goal or objective
  • Ease – pick metrics that are easy to measure and easy to understand
  • Relationships – show multiple metrics in a way that makes their relationship obvious

A great dashboard should be simple, easy to read and capture only the most important and controllable metrics of a business. It must also show how these metrics change over time and how they are related to each other.  Remember the word TIGER: Time, Impact, Goals, Ease, Relationships.

Want an example?

Every dashboard starts with knowing what to measure.  But what is important in a business may not be obvious at first, even to the entrepreneur. It’s easy to say “sales” (and every owner’s dashboard should track sales!) but let’s go deeper. What is the real “engine” of sales? An online retailer’s sales engine is far different from that at a lumber mill or real estate office. Different business models have different key ingredients.

  • The online retailer can only sell when people come to the website, so the key metrics might be traffic, number of ads running, or click-through rate.
  • The lumber mill can sell as much wood as they can cut, so the key to sales might be the tons of wood processed or the board-feet produced.
  • The real estate brokerage makes money when sales close, but that is driven by the number of homes under contract, or total value of pending transactions.

Start a dashboard by identifying the underlying drivers of sales, then we can measure and monitor those operational items that we can actual impact or control through careful management. Plotting “sales” is important, but not all that helpful by itself.  A business that drives sales should observe and record the factors that result in sales as well as the sales themselves.

Free Bonus
When we correctly identify both the key drivers of sales and measure sales, we get a nice bonus – the ratio of the two. For example, the real estate broker may track number of houses under contract, and commissions earned. By calculating and tracking the ratio of these two numbers (dollars earned / houses contracted), she can get a feel for how fast houses are closing, how efficient her agents are at finding buyers, and how much her houses are selling for. Tracking each of those specific numbers every month would be arduous. By tracking just the ratio of houses to dollars, the experienced broker can spot trends or anomalies which can direct further investigation. (See September in the image?  Wow! What happened?)

dashboard houses big 500x199 Is There a T.I.G.E.R. in Your Office?  5 Things Your Business Dashboard Must Do

[Click Image to enlarge.] This TIGER Dashboard shows the key driver of sales (Homes under contract is the blue line), actual sales (in green) and the ratio between the two (orange line). Note that the ratio starts to decline before sales. Often ratios can predict big changes in operating results well before they are obvious!

[!](iPad / iPhone tips for opening XL files)

By identifying key drivers, the results, and the ratio between them, we will have a crystal clear map of where we are and where we’re going.

Dedicated to your (TIGER-powered) profits, David

PS: This is a tiny excerpt from my upcoming book, “Entrepreneur’s Guide to Financial Statements”.  It sounds like a boring title, but I promise, the book is packed with easy-to-understand examples and actionable advice. (Like the TIGER above!)  Watch for the book, which is due in September 2013 from Praeger Press.  I’ll make it available here, and on Amazon!

4 Comments
  1. Great post as always, David. I love Dashboards, and advocate for them constantly. Dashboards need to be shared company wide, and not just for the executive team. When everyone is monitoring the same KPIs, that’s when great strides occur.

    • Thanks Andy! Great to see you on RockSolidFinance.com.
      Do you have any favorite dashboard tools or software? In another post I offered up the “Big Piece of Paper” method (which I still love — print it large and let everyone see it!). But these days there are a lot of software tools with access to so much more data (including social graphs, “big data”, and auto updates from QuickBooks, etc.). I’d love to hear about tools that you love.
      PS: Here’s the other post with a different template to download and print: http://rocksolidfinance.com/business_dashboard/

  2. David,

    I have recently purchased a dashboard product from Decision Pace that has allowed me to easily create and distribute dashboards to key personnel using a URL. I am in the early stages of implementation but the ease of use is quite appealing.

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