Get the numbers and decide fast on reversible bets

1. When not knowing is the reason

Once doing more is ruled out, the reasons are taken in turn. They are not necessarily in order of how common each one is; they are in the order in which they are thought through.

The first one might look like this: what you spend and what you make are both unknown to you. Then nothing can be done. You cannot do more, because you cannot tell whether more is working, or whether any of it is. So the move is to get your numbers. This is where the metrics come in.

2. Make knowing the data the priority

This is where knowing the data becomes the priority. You stop what you are doing, while you keep making the sausage, as the saying goes. The rest of your resources go to tracking:

• how many people are walking in the door;
• how many phone calls are coming in;
• how many people are buying.

Start tracking the basic metrics of the business. If you can't do more and the missing numbers are why, getting them comes first, ahead of everything else.

3. Balance the data with your gut

The point matters a great deal, and a very important one sits beside it: balance it with your gut. Complete data on everything in your business is something you will never have; some data you will.

The game of entrepreneurship is oftentimes making decisions on incomplete data. But at least you can get a direction. The example is an owner who tracked nothing and does not know the return on ad spend, yet can see this much: months with more ad spend bring in more money, and months without it do not.

The more specific the numbers, the more surgical you can be in getting the most from what works. At the simplest level, though, spending on ads brings in more, so try to do more of that. That is a decent bet.

4. Ask whether the bet can be undone

The next framework, as it is thought to run: if the direction is correct, is the decision reversible or irreversible?

• Spending money on ads. Reversible. You could just stop spending, and it is not a big deal.
• Spending your life savings on it with no backup. That would be irreversible.

That is how bets are thought through. And on things that are reversible, you should decide very quickly: it is not the end of the world.

5. The business moves at the speed you decide

This is thought to be super important, because many, many businesses are limited by nothing except the entrepreneur's ability to decide. For one owner it took not just a couple of years but, by that owner's own recollection, probably over a decade to work out: the speed of the business was proportional to how fast its owner could make decisions.

The chain behind it runs like this. Once a decision is made, a resource begins to be allocated. So the speed of the business rests on how fast you allocate resources, and that runs back into how fast you decide. Hence the weight put on being definitive. Where the resources should go is its own procedure: SOP 185 — Allocate resources to the constraint and use leverage.

How fear gets in. What happens, in the view here, especially as the business gets a little bigger: there are more decision makers, and people start to treat every decision as though it were irreversible, because people hold other people accountable for mistakes. That, it is thought, is what creates a culture of fear. The example set beside it is a large platform company that for a very long time held, among its core values, a willingness to act quickly even if things break: be willing to ship something and see what happens, and if it breaks, roll it back.

6. Better data, faster decisions

Here is where it gets nasty: the speed of decisions is typically proportional to the quality and quantity of the data. When the data is very clear, it paints a clear picture, and decisions speed up. With all the data in hand, you could decide on the spot, and with high confidence.

This is where data, a subject that feels very boring, earns its place: it lets you decide faster, which lets you allocate resources faster, which lets you get returns faster. That is the cycle.

7. Your job is decisions

One framing often used here comes from paid days spent with owners of big businesses: what is provided is decisions as a service. What are the big decisions that need making? Make them, so the owner can feel confident putting resources behind them and going.

The same framing is turned on you. As the entrepreneur, what the business hires you for is decisions as a service. The further up you climb, the more that is almost the whole of your job: making good decisions.

8. The basic numbers

At the most tactical level, make sure you have the basics down, in this order: lead, scheduled, show, sales, and then what are known as "the math ones". Those you can look up; they are not hard to figure out. After them come acquisition cost, lifetime gross profit, revenue, profit, and then cash flow. These are the things you should know how to do.

The simplest way to count them. Leads you just count in your CRM. Schedules you can literally count. Shows you can count too. Then take percentages:

Rate	How you get it
Schedule rate	Scheduled over leads
Show rate	Shows over scheduled
Close rate	Sales over shows

That is very straightforward. SOP 224, section 6, reads price off a close rate counted from offer to close, a different base from sales over shows. Acquisition cost, lifetime gross profit and payback period each have a page of their own: what a customer costs to acquire is SOP 56 — Define and compute what a customer costs to acquire; lifetime gross profit is worked through on SOP 55 — Compute lifetime gross profit and the ratio that gates spending; and payback period is SOP 57 — Compute the payback period and shorten it.

9. The exit

The aim is more, and where more is possible, you do it. Where it is not, the first reason it might not be is simply that the metrics are missing. If you do not have them, go get them. That is your exit from the list.

10. What this page does not decide for you

• Which numbers "the math ones" are. They follow the counts and are held to be easy to look up. One reading is that they are the rates in section 8, worked from those counts; the other is that they are a separate set. This page does not settle which reading is right.
• How big a business must be before decisions start to be treated as irreversible. The only guide is: a little bigger. This page gives no figure for that size.

11. The checklist

Step	What to do
Name the reason	If you cannot do more, ask whether you know what you spend and what you make
Make data the priority	Stop what you are doing, keep making the sausage, and put the rest of your resources into tracking walk-ins, calls and purchases
Read the direction	With incomplete data, look for the direction: when you spend more on ads, do you make more?
Test the bet	Ask whether the decision is reversible; if it is, decide very quickly
Count	Leads in your CRM, scheduled, shows, sales
Take the rates	Scheduled over leads; shows over scheduled; sales over shows
Know the rest	Acquisition cost, lifetime gross profit, revenue, profit, cash flow

12. Where this sits

• The step before this one, doing more of what already works: SOP 187 — Exhaust more before anything else. The step after it, the market: SOP 190 — Check whether the market is really too small.
• The schedule and show rates with a worked set of figures, and why the show rate matters: SOP 85 — Set availability as a show-rate lever, section 1.
• A fuller list of sales numbers tracked by hand for each rep: SOP 149, section 5.
• Moving from decisions by gut to decisions by data, product line by product line, at a later stage: SOP 154 — Get granular financial data, section 7.

13. What this page does not cover

Close-rate benchmarks for each way of selling, each on its own base, are SOP 245, section 4. Benchmarks for the schedule and show rates, and the software for tracking them, are not covered on this page.