Hey everybody. Welcome back to Paradigm Playbooks podcast. I'm your host, Dave Kozak, alongside my co-host, Mr. Steve Cook. Sir, how are you?
00:01:03:01 - 00:01:40:06
Unknown
But yeah, yeah, See, it's been a good conversation. So today we want to bring the topic from last week which really understanding finances into the the next step, which is how to use that understanding, apply that understanding, grow, scale, acquire whatever it may be, your business. And then I think to tie it all back together, Steve is like trying to simplify the metrics that you measure regularly so that you're not constantly having to go through the book, right?
00:01:40:06 - 00:02:04:06
Unknown
Meaning. And and I see that sort of tongue in cheek. You should always be in the numbers. But I think you can you can cause death by a thousand cuts with yourself if you spend too much time worrying about too many numbers, trying to focus on all of them instead of the ones that really matter. So, Steve, that gets back to one of your favorite subject matters, which is the key performance indicators of the KPIs.
00:02:04:06 - 00:04:02:06
Unknown
Right. So talk to us on your side. You know, we talked about your price increase in always increasing one thing or the other when you are looking at your business, right? What measurables are you paying attention to every day, every week, every month? And like, how does that expand? Okay, yeah, yeah. Okay, okay, okay. And so in my business, a little different structure, right?
00:04:02:06 - 00:04:37:12
Unknown
We have a we have an indicator that that is not to a like a allocation of square foot or something like that where we have to measure our obviously the gross profit, all of that stuff comes into play. But what we focus on is we have a really solid number of the amount of people that are interested in our business, that become clients of our business, that then do the full kind of gamut of business offerings or buy the full gamut of business offerings we have.
00:04:37:14 - 00:04:58:04
Unknown
So we measure people walking in the front door, because I know that a percentage of those people are going to do A, B, C, and D, and I know the percentages all the way down that line. So if I measure on a regular basis, the people walking in the front door or whatever the attraction model is, I use the front door as the easy example.
00:04:58:05 - 00:05:27:16
Unknown
I can see the health of all the other parts or at least have that sort of knowledge of health of of business. Now in reflection to that, on a weekly basis, we're looking at those numbers and so if those numbers are good, what we're managing is the alignment of the other numbers, right? So let's say we have 100 people walk in and the conversion rate on those walk in slips in a in A in a particular week.
00:05:27:18 - 00:05:49:20
Unknown
Well, what happened was it was it you know, people weren't showing up. Was there a weather event? Was there something that caused that? We can't. And if we can't justify phase one, then we dig into phase two, dig into phase, and we go deeper and deeper. So we use the forward facing indicator, which is knowing our number of people walking in the front door to.
00:05:49:21 - 00:06:44:13
Unknown
It's either it's either, you know, we use the red light, green light, yellow light. If it's green light, move on. We're doing what we're supposed to do if it's yellow. Okay. Was it a fluke? If it's red. Hey, tap in. Let's dig into the numbers beyond that. So, you know. Sure. Yeah, that's true. Yep. Yep, yep. Yeah. And we have a meeting once a week.
00:06:44:13 - 00:07:01:22
Unknown
We call the directors meeting, and we're all of the directors of each of the departments come together with the with the owners. And then we have that conversation. Hey, what happened? If we identify something, then we're okay. What happened? Was it operational operations? Tell me what what you saw. Was it sales? Hey, sales manager, tell me what you're feeling.
00:07:02:00 - 00:07:26:18
Unknown
marketing. Tell me, like, do we have a Facebook issue? Did we not put as much money towards our advertising as we historically did? And so having all of the members and all the owners of the KPIs, right, that are one, they're one true indicator, but they're three KPIs are being measured in different areas, Right. To me, what what I never want is whisper down the lane.
00:07:26:20 - 00:07:47:14
Unknown
Well, never, never want one person say, this didn't work and then it gets to the next. And so we try and address that head on every week. And some weeks that directors call is 10 minutes. All systems are working fine. No, no projects on the horizon that need to be addressed. And sometimes that meeting can can be the better part of 90 minutes.
00:07:47:16 - 00:08:09:06
Unknown
And it's a structured meeting. Right. But, you know, I'm sort of one of these. If it's not broke, don't fix it. At the same time, consistently consider innovation. We do a lot of split testing with all of our stuff. You know, if we have a process that we do one way and we want to if we want to change the process, let's let's let's test it.
00:08:09:09 - 00:08:34:07
Unknown
Let's walk through it before we do it. So and these all tie back to our we do a lot of forecasting, which I think is a big deal too in this, because if I'm forecasting based on based on the numbers as they exist today and our numbers start slipping, well then my forecasting is off. And if my forecasting is off, I'd rather know it right now.
00:08:34:09 - 00:10:48:01
Unknown
Then get there, not hit the forecast and go, Well, what happened? And well, hold on. I want to I want to hit that nail. Nail on the head and go, Yep, yep. That that's I mean, I think gross receipts, gross profit I think is I don't know. I got a you got it. This is sort of what comes in the last meeting is understanding that gross profit number.
00:10:48:01 - 00:12:04:07
Unknown
I guess if you're running a class based business, you have to leave and you're trying to measure that particular group or cohort of, you know, that class, even you have to allocate some cost to so that agreed. Yeah, but I yeah, yeah. And I think I think you should have some like general hourly cost or rent heat spatial cost.
00:12:04:13 - 00:12:43:15
Unknown
Right. Not, not specific cost but spatial costs like it costs to have this, this facility open, have it insured, have it heated, have it lit costs X dollars per day. are you taking 20% of the space every single day? So, no, the way I look at it is you have to go to an hourly cost and then multiply it by the number of hours you have.
00:12:43:17 - 00:13:10:22
Unknown
So like, let's say that that half a million divided by 365 divided by 24 hour or ten hour, let's say you're open from 10 to 10. It's a 12 hour, nine divided by 12 and you have your hourly cost for that for the standard stuff or on hours that you I think the value has to be the hours that you use.
00:13:11:00 - 00:14:16:05
Unknown
Although allocation is probably better, right, Because then the target is there at max capacity. Right. And so if you're constantly striving for max capacity, then it would be the hours allocated by to that's yeah, I think you know, I'll use it. Let me go to see if I can make this correlation but in, in in in the insurance world, in property casualty insurance specifically we have what's called a retention rate though your retention rate is 90.
00:14:16:05 - 00:14:45:12
Unknown
That means your business is is losing 10% of its value every single year. You have to replace that 10% before you get to any growth metric. So if you want to if you want to grow, let's say you need 5% growth, you actually have to create 15% growth to get five because you're losing ten. So in in terms of we'll call it the sunk cost of just having the facility and having dead time and dead space, I think that is a net on the entirety of the business.
00:14:45:14 - 00:15:14:12
Unknown
So I don't think that can be that. I don't think you should allocate that directly to a particular subset unless that subset is failing to meet its expectation of total people. Right? If you lay out a program that has capacity for 30,000 square feet of space use and you only bring, you know, the equivalent of 10,000 space years into that, then it's in there, right?
00:15:14:12 - 00:16:26:05
Unknown
It's into in that cohort. Agreed. When I agreed,
00:16:26:05 - 00:16:33:22
Unknown
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00:16:33:22 - 00:16:55:12
Unknown
yeah. And I think this is where you have to figure out what's easiest and best for your particular facility. Right. Yours is sort of this unique super hybrid environment where you have the pure athletic space. You have two pure athletic spaces. One's more tailored towards baseball, but can be used for other.
00:16:55:14 - 00:17:19:14
Unknown
Right? Then you have the open gym space, which can be used for volleyball, basketball, you know, Zumba classes, whatever else comes in there. Then you have, okay, the golf, the laser tag, the the party rooms and things like that. So you can't assume that you're going to have the party rooms filled during, let's say, school hours. Right. Because now, could you do something else?
00:17:19:14 - 00:18:48:01
Unknown
I know you've done book clubs in there and things like that that have done it right, but you can't allocate the use of that space. It has to be it has to be divided over the amount of opportunities you have to do. Those parties like A Yeah, nope, nope. Well, let me just hit that position because I think to tie it back to pricing and knowing your numbers, right, that laser tag space we use, let's say you can only fill typically, you know, let's say two games a night during the week and, you know, 15 games on Saturday and 15 games on Sunday and five or six games on Friday.
00:18:48:02 - 00:19:13:07
Unknown
Well, you have a certain or a Y per square foot that you're looking for. Well, that then determines the amount of opportunities you have, determines the pricing that you have to have to hit the square foot KPI that you're there, the square foot price per square foot return you're looking for. And so now you've just sort of built all the parameters to help you back into what you need to charge for that.
00:19:13:07 - 00:22:35:18
Unknown
But then at the same time measure the KPI towards the goal that you laid out for. And it's fun to, but yep, yeah, the Yeah. Yeah. And like if just to give, give an idea of how granular you can get and what to watch out for as you're talking about all this
00:22:35:18 - 00:22:35:21
Unknown
grant.
00:22:35:21 - 00:22:40:12
Unknown
So I'm going man, if you could measure people walking in the door and know
00:22:40:12 - 00:22:46:17
Unknown
how many people walk through the threshold on a given day and then how many activities are taking place after they walk through it.
00:22:46:17 - 00:23:17:10
Unknown
So let's say you get, you know, 400 people in the door, but for every 400, you know, 100 are parents that don't do anything. And, you know, there's one kid that does all these things. So you really get granular on use of space and what performs. But I think you get so lost in the weeds in that that you'd you'd basically a analysis paralysis, you'd be analyzing all these things that you could not possibly fulfill any change to make it better.
00:23:17:11 - 00:25:11:16
Unknown
Right. So you got to be careful at the same time, like the numbers can be very distracting, especially if you're measuring the wrong ones. Ten bucks? Yep. Yeah. Yeah. I mean, think about, though, If you know how many people walk in in a given year and you know how much money you made in a given year, if you up the number of people you know there's a there's your average person walks in the door, they spend X amount of dollars if you know they spend $10 and you can get 200 additional people to walk in the door.
00:25:11:16 - 00:25:48:10
Unknown
You're increasing the bottom line based on usage. You know, there's and then and this sort of all goes, you know, it's this constant numbers to sales, to marketing, to numbers, sales to marketing to space usage, to utilization, to filling the rolls. You know, Steve, as we're talking here and I, I know Steve's business intimately and I know the structure facility and let's say, you know, your highest, you know, return on square foot when fully at full capacity let's say it's laser tag just for for concept here.
00:25:48:12 - 00:26:14:04
Unknown
If you get people that are coming in droves to the batting cage right. And that's the that's the unique proposition you have because there aren't any coin operated batting machines elsewhere. And you put a sign facing the batting cages as you're walking out says, hey, you got your swings in, You know, you come to the front counter. If you if you bought a ten pack, we'll give you a 50% off a laser tag.
00:26:14:06 - 00:26:51:02
Unknown
Right. And all of a sudden you see this this influx of laser tag people, you're you're selling 50%. But it's new business. You would never had otherwise. How how like strategic can you get inside your own building to promote other parts of the building to drive it? And then you're coming out of laser tag and it says, hey, don't stop here, mini golf right around the corner, you know, And can you can you sort of create that customer journey to a higher revenue?
00:26:51:04 - 00:29:22:00
Unknown
Yeah, I by themselves Listen, I again, I worked but and and and then again the free birthday is the room rental is free and the drinks are free, let's say. But hey, that money you were going to use for that rental in those drinks, well, hey, do you want to add on laser tag? Do you want to add on mini golf?
00:29:22:00 - 00:30:44:13
Unknown
Do you want to add in? So now and for every child that that party brings in is another opportunity for another child to have a party. And the exposure in that that whole thing. So again, I don't want to get too distracted on the but it's it's so related. I mean, it is it is really the the idea if you know your numbers, then you can make those strategic decisions that.
00:30:44:15 - 00:31:32:15
Unknown
Well why do you think they're in airports. Right. I mean like I might have sat there once or twice, you know, you're waiting around, the kids are running around the arcade. But that just. Yeah, well, that's society for you. Yeah. And I think I think the idea is to get to the easiest trackable number that is that you have kind of control over.
00:31:32:20 - 00:31:52:20
Unknown
Right. And if you're doing that from a KPI standpoint and you understand the flow in the chain to the bottom line, I think you can influence things without having to get super granular every single day because the you can analyze numbers 17 different ways, make them sound good, make them look good, and all of a sudden the bottom line isn't good.
00:31:52:22 - 00:34:01:05
Unknown
So be careful, understand if you understand the business model that you run, you understand the objectives you're trying to achieve, you can relate to the specific measurables you really want to measure and influence. Yeah, well, a hours of operation. I mean. Yeah, yeah. I'm not sure who was here, but it's vitally important. So hopefully this was helpful. Guys, if you enjoyed the conversation today, please like share or subscribe to the podcast and stay tuned for more episodes as we delve further into sort of the entrepreneurial world and how to run a business, as well as interviewing business owners across the country that are in the trenches with us.
00:34:01:05 - 00:34:05:20
Unknown
So that's Paradigm Playbooks podcast.
00:34:05:20 - 00:34:24:19
Unknown
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