Our company has the opportunity to work with both existing leisure businesses as well as new startups. Our work often includes assisting businesses with improving or setting up their management and accounting systems. What we typically find is that the conventional wisdom is to have an accounting system to monitor the business' performance. Accounting is an important aspect of running any business. However, it alone tends to be to myopic in its analysis. Too often, a true picture of how the business is doing gets lost in a sea of numbers. Instead of limiting monitoring to a typical profit and loss statement, we work with clients to set up a performance monitoring system that first focuses on the key indicators of success.
In any business, there are often as few as a dozen key indicators of success. If these are performing satisfactorily, there is little need to dig deeper into the numbers. If one indicator is not in a predetermined acceptable range, then that is time to dig deeper into the data to find what needs attention and correction. These indicators often require capturing and interpreting data in ways other than typical accounting reports and categories.
What is important is to clearly identify those key indicators. There is an old truism, "That which gets measured gets managed." Measure the right things and you can be successful; focus on the wrong things and success can become illusive.
Here's one illustration that goes back to the 5 ways to grow a business (see previous article). In the financial statements of most leisure businesses, there is a line item for food and beverage sales. If the facility is like many FEC type operations with a snack bar, customers come primary for the anchor entertainment attractions, and as a result of being there, may or may not make a purchase at the snack bar as an impulse item. Measuring only total food and beverage sales does not give a true picture of what is going on. The reason is that in this example the success of the snack bar is highly dependent on the facility's attendance. So year to year comparison might show that the F&B sales are increasing, when in fact the per capita expenditure by each guest might actually be decreasing. So rather than look at total F&B sales as a key indicator, we set up performance monitoring for our clients to instead measure per capita F&B sales. That allows both management and the food and beverage manager to focus on what is really important to measure, how much each guest spends once they come through the front door, and to have a clearer picture of their management success or shortcomings.