Six Sigma and Performance Tracking

Pricing, product, sales, accounting, marketing and hiring are important in any business. Small-business owners are typically "know-it-alls", wearing several hats and solving problems through trial and error. I recently saw an article in The Street about applying the Six Sigma methodology to small businesses.

I first came across the Six Sigma methodology in one of those quality management classes which were a real drag. However, the basic principles of the Six Sigma methodology -- define, measure, analyse, improve and control -- does make a lot of sense. In order to seize opportunity and make money with the business, it is crucial to have a system in place where one has the ability to monitor changes, spot problems and opportunities first, and act accordingly.

One of the problems I've had in operating a business is the lack of complete historical information. I work with a partner who unfortunately doesn't adhere well to a system. As a result, a lot of useful information is lost along the way. For instance, to track how well a marketing campaign is working, it helps to know 1) how many calls are coming in 2) the source or cause of the call (which advertising medium or channel) 3) what attracted them to call up 5) the quality/profile of the prospect 6) the sales conversion rate.

With that kind of information, it is possible to identify market trends and do strategic target marketing of products for a certain profile of buyers. Rather than just dumping a lot of money into a marketing campaign, it makes more sense in the long run to identify more cost effective means of reaching out to the target audience . It is one way of reducing the bottom line without hurting the top line.

At the end of the day, the methodology works only as well as the data one can collect about the business. Like they say, garbage in, garbage out.