Let’s face it when it comes to running your business, looking at metrics and key performance indicators is not the sexy stuff, who wouldn’t rather be out having coffee with customers, going to networking events or pitching for new business.
The harsh reality is though that 50% of new businesses in Australia don’t survive more than 4 years because running a successful business is more than having a great idea, being the best at your craft or delivering a great pitch. To survive and grow you need to run your business, not the other way around. You need to understand where you are heading, make plans to get there, then work out and track your performance measures and how they are changing as your customers, your market and the economy changes. Once you can do this your business will become proactive and agile with the ability to adjust or seek help when things are going off track or do more of the things that are going well.
But first you need to know how to set your business measures up and how you can use them as part of your normal day to day activities to keep on top of things … so let’s get started.
What are they? - To select the right measures which are relevant to your business, you need to go back to what your current strategy and goals are. If, like a lot of businesses you don’t have these laid out, it's OK, time to sit down and work through these and come back to your key business measures once you’re set. This is important as your measures must link directly between your vision and the operational activities that happen on a day to day basis to make them a reality. For example, if your goal was to grow your customer base, a key measure may be the conversion rate between quote and invoice or if it was to improve profitability it may be overhead costs. Limit the number of measures you select but make sure each one of your business goals has at least one allocated, common mistakes made are to have too many which becomes a burden to administer or selecting ones which don’t support your business goals.
How do I measure them? – Now you have set what they are you need to make sure you can measure them, think about how and where you will get the data from, if it's a financial measure your accounting package would be a good source, customer conversion may be from a CRM system. Think about who will be responsible for getting the data, how often will it be collected and will it cost to access it. How do you ensure it is accurate and can you guarantee consistency through automation? If you have an existing business can you get historical information so you can pick up trends and changes?
Dashboard & Visual Management – Your business measures must be displayed in an easy to use format showing the measure, the target to achieve, the change month on month (or period you choose) and over time (usually 12 months). A red, orange, green traffic light display on each measure can also allow you to quickly pick up what is on track, on watch or what needs attention. A one page dashboard is ideal for this, something which you can look at and quickly ascertain the health of the business. For team based businesses a visual management board is also a good way of engaging people, giving them a shared sense of what is important, what is the target, how things are going, what are the actions and who is responsible for them.
Use & Update – There is no point putting in all this great structure and vigour without acting on the information, after all the whole purpose of business measurement is to monitor and make changes to your business that keep it thriving. Make sure you review on a regular basis (weekly is ideal) and use to drive business improvement, develop action plans and seek help when measures miss their target or are trending in the wrong direction. Remember business measures are living and change as your strategy, priorities or targets change so make business measurement a part of your normal routine.