BONUS: The Wizard’s Prediction of What’s About to Happen

Is there any part of your business you’d like to improve?

Listen to me: You won’t improve what you don’t measure.

Here’s how to get the ball rolling:

Step One: Identify, clearly, what you’re trying to make happen.

Step Two: Determine how progress might be measured. (This is the hardest step by far.)

Step Three: Measure current performance – prior to making any changes – to create a baseline. 

Step Four: Implement a change you believe will alter the outcome.

Step Five:  Measure again, and compare the results to your baseline measurement.

Repeat steps Four and Five until satisfied.

You’ve heard of “consumer confidence,” right? But did you know Reuters News Service and the University of Michigan established the original Consumer Confidence Index by

(1.) measuring the mood of the American public in December, 1964, and

(2.) arbitrarily assigning that mood a value of 100?

So in effect, when someone says, “Consumer Confidence is up,” or “Consumer Confidence is down,” what they’re really saying is, “Here’s how Americans are feeling compared to December, 1964.”

I’ll bet you considered the Consumer Confidence Index to be more authoritative than that, didn’t you?

The Index was later revised to use 1985 as the new baseline because it was a year without peaks or troughs. The Federal Reserve looks at the CCI when determining interest rate changes, and it also affects stock market prices. That’s powerful stuff.

Here’s my point: Someone – let’s call him RALPHIE – got up one morning and said, “We should monitor the mood of the public.” Step One was completed in that single sentence. An objective had been clearly identified.

Now it was time for Step Two:

FRIEND: “How are we gonna do that?”

RALPHIE: “I dunno.”

FRIEND: “Wanna just forget about it and go have a beer?”

RALPHIE: “No, let’s ask around. Maybe someone will have an idea.”

FRIEND: “Okay.”

They bumped into someone who said, “The government’s already measuring the Gross Domestic Product, so why don’t you just compare that to how much Americans are spending each month?”

RALPHIE: “Sounds good to me.”

And then a person who overheard all this said, “You could ask people their opinion of current economic conditions.”

RALPHIE: “Okay. We’ll add that in.”

FRIEND: “And while we’ve got them on the phone, we’ll ask them what they think the economy is about to do!”

RALPHIE: “Okay, here’s what we’ll do: We’ll look at that Gross Domestic thing that first dude mentioned and then factor in people’s answers to our two questions.”

FRIEND: “Do we give both questions equal weight?”   

RALPHIE: “No, we’ll give their opinion about the future 50 percent more weight that their opinion of current conditions.”

FRIEND: “That sounds complicated.”

RALPHIE: “I think it’s just a 60/40 thing but we’ll ask someone down at the university.”

FRIEND: “Well, 60 is 50 percent more than 40, but we should go ahead and ask the university dudes because that’ll give us credibility.”

RALPHIE: “Now all we need is a really official name.”

FRIEND: “You mean like ‘The Better Business Bureau?’”

RALPHIE: “Exactly. Bureau is a power word. It makes’em seem official.”

FRIEND: “Maybe we could call our thing an ‘Index.’”

RALPHIE: “Ralphie’s Index?”

FRIEND: “No, but we’ll think of something.”

RALPHIE: “Yeah, we’ll think of something.”

There are currently two trends in America that have me utterly fascinated. I’ll tell you what they are in a minute, but first let me tell you how these trends were observed:

(1.)    My partners, my staff writers, my media buyers and I maintain ongoing conversations with small businesses across the US and Canada.

(2.)    Our income is tied to how much these businesses grow or decline each year, so we keep a close eye on

how they’re trending.

(3.)    We write ads and buy media all day, every day, for these clients.

(4.)    This requires us to have thousands of conversations each year with local media reps in cities large and small from coast to coast. In turn, each of these media reps is in touch with dozens of local businesses in their towns.

(5.)    These conversations give us a finger on the pulse of Small Business America. They allow us to spot trends long before the trends become news.

Think back a couple of years: Bernie Madoff and the Mortgage Meltdown were a one-two punch that dropped us to our knees. America got scared and hunkered down. People were frightened about losing their jobs and their homes. Credit got tight and the price of gold soared.

The worst now seems to be over. But strangely, the sales volumes of businesses aren’t climbing at quite the same rate as public confidence.

Here’s what’s happening:

Trend One: People are feeling more confident than they were a year ago. Quite a bit more confident in fact. This confidence would normally indicate a strong Christmas.

Trend Two: People have learned they don’t need as much as they once thought they did. We’re learning to live within our means.

Uh-oh. These are conflicting trends. And both of them are strong. My gut tells me these trends will cancel each other out and Christmas 2010 will look a lot like Christmas 2009. Focused business owners – those who keep a sharp eye on the ball –  will be slightly up over last Christmas. Average business owners – and those unlucky enough to be in small communities that experienced the loss of a major employer – will be flat to slightly down.

Powerful trends are afoot but I don’t think there will be any strong indication of those trends this Christmas because they sort of cancel each other out.

Weird, huh?

Now all I need is a catchy name for these observations and a university to give me credibility.

Roy H. Williams