Critical Factors Defined

Posted on 05/04/15 No Comments

Critical Factors, most-often referred to as the Significant Assumptions in most business plans, are those factors that are critical to the success of your company. They are referred to as critical factors because, while there are many factors that contribute to the success of a company, critical factors are… CRITICAL.

Seriously, when you really come down to it, every aspect of a company comes down to numbers.  From the supplies you order and use – to the minutes you spend in meetings – to the wages you pay employees, it is all numbers.  And, among those numbers, is the amount of time it takes to accomplish any given task or objective.  Thus, it would be inefficient, if not impractical, to constantly monitor EVERY number related to the performance of your company. Just as the dashboard in your car monitors the critical systems to get you where you want to go safely (and sometimes comfortably), the dashboard for your company needs to monitor the factors that will make you most productive and profitable (on a sustainable basis). You just want to focus on the critical factors.Apply Pareto Principle

But how do you define ‘critical‘?  In fact, the critical factors for every industry and even for specific companies within each industry are different.  In a restaurant, for instance, critical factors might include:

  • Table turns
  • Up-sells such as garlic bread, salads, wine, desserts, etc.
  • Spoilage
  • Electricity

And we will stop there with an example.

First, we are using ‘electricity’ as an example because basically every company uses electricity in some way. But electricity is not necessarily a critical factor for some companies. Here’s an example of how electricity proved to be a critical factor for a restaurant client.

We were working with a restaurant chain.  Each month we would meet with the managers of each location. In one location, the electric bill was consistently higher than in the others; an anomaly in the financial statements.  For this reason we started to track it.  To make a long story short, once we started tracking it we started looking into the cause of it.

Ultimately it was discovered that the lock on the freezer door was broken.  The door was not properly closing which was not only keeping the internal light on but also allowing the cool air to escape.  Critical factor?  Absolutely!  Not only was it costing an extra couple of hundred dollars per month for electricity but, much more importantly, the temperature of the food closest to the door was not being properly maintained.  Imagine if a food inspector had discovered it before we did?

Suffice it to say, Critical Factors are different for every company.  We specialize in assisting our clients to identify, manage and execute the unique critical factors to their success.

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