My seven-year-old son is very active in youth athletics. He plays soccer, basketball, baseball and flag football any chance he gets. What I’ve noticed about his successful teams is that the coaches focus almost completely on the fundamentals.

For example, he had a basketball practice last night where the boys literally only shot baskets for two minutes of an hour-long practice. The rest of the time was spent on passing, catching and defense. His basketball team routinely outscores their opponents, but it’s not because they’re great shooters – far from it – it’s because they play great defense, get rebounds and pass the ball better than their opponents.

It’s the fundamentals that matter.

What does this mean for small business? What fundamentals matter most?Fundamentals in Business

Most small business owners run self-funded companies focused on organic growth. If that’s your situation I recommend keeping an eye on the following metrics:

Cash Received. I know it’s not too surprising, but cash really is king, and knowing you’re on the positive end of cash flow is critical. I’m not sure who I’m quoting here, but this statement sums it up nicely: “Profit is like food or water – you can last a few days without either, but cash is like oxygen for your business – you won’t survive more than a few minutes without it.”

Day’s Sales. Day’s Sales allows you to measure the average amount of money you earn each day over time. It removes random fluctuations and gives you a fairly good measure of your earning power. This metric helps us recognize the value of a day to our team, so when we are weighing downtime vs. productive time we know how much income we might forfeit as a result.

Day’s Sales in Accounts Receivable (aka Day’s Sales Outstanding). You’ll almost inevitably have some money tied up in accounts receivable. By dividing your Day’s Sales into your accounts receivable, you can measure how much of your earning power is locked up in someone else’s checking account. Most small businesses aim for this number to stay under 45 days, which can indicate you’ll have healthy cash flow coming in over the next month or so. It also indicates that your accounts receivable time frame is relatively healthy. In other words, you’re not bankrolling your client’s projects and letting them pay you at 60, 90, or even 180 days after you have billed them.

scheduled_downtimeBrightsource IT is a technology company, so I have to ask this question:

What are the fundamentals of technology for small business?

Downtime. For our purposes I’ll define downtime as the amount of time your staff is unable to do their job because of technical interruptions. It could be their individual workstation is causing a problem, or a slow application running on their workstation, or a network or server issue. It doesn’t really matter what it is –  if your staff is struggling with technology problems instead of doing their job you are losing money, i.e. your Day’s Sales number is plummeting. And the more employees you have who are suffering (e.g., due to a network or server issue) the faster the fall.

Successful backups. Backups are not the only part of a disaster recovery plan, but they are a critical component. And it’s not just about backing things up, but knowing that you can restore the data when it’s needed. Do you know that your backups have been successfully completed? Are they actually restorable? In our world, an untested backup is about as good as no backup at all.

Budget. Technology is actually not that hard to budget. If you’re playing a guessing game about when you’ll need to invest in new technologies, you’re missing the bigger picture. Technology is a tool, and like any tool there are patterns to how it wears down and when it needs to be serviced or replaced.

Owner confidence. On a scale from 1 to 10, how confident are you that technology is an asset to your company? Technology is the second largest investment most businesses make, second only to your people. There can be a lot of details to consider when making technical decisions, and hardly enough time in the day for a small business owner to keep up with all of those details while also focusing on essential business metrics. When you leave the office in the evening to spend time with your family or lay your head down at night, what’s important is that you know your technology is in good hands.

Brightsource IT is an Information Technology provider located in St. Louis, Missouri. We have been providing complete IT management and tech support for small and medium businesses since 2004. As members of the Apple Consultants Network, we also provide Mac and iOS management training to corporate IT departments.

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