INTRO
Those of you that know me know that I’m a big believer in measuring business performance and like to work from usefully arranged numbers. Properly done, business measurements are the truth about what is going on in a business. Good information demands inquiry, leading to investigation and resolution of issues, or discovery of new opportunities. It’s midway through the year, so in today’s edition of the Profitability Thinking Newsletter, I am writing about measuring business performance to help guide your actions for the rest of the year.
Measure Results to Point the Way
We are more than half way through the year. At this point, it’s not unusual that I have some questions for you about your business performance. Not all of these questions apply to each of you, but everyone will find there are several questions that will. I encourage you to answer these questions for yourself and your business. If the information hasn’t been compiled for your business, I invite you to develop it.
- Are your sales, gross profit, expenses and operating profit where your business plan predicted they would be half way through the year? How are these results compared to last year?
- Are you working from a written business plan?
- Where is your business coming from in terms of revenue and number of transactions?
- How much of each type of product/service are you selling in terms of revenue and number of transactions?
- How profitable are each of your product/services? How are these products/services performing compared to last year?
- How profitable is business developed from each of your sources of business? How do these sources compare to last year?
- How many days of sales do you have in receivables?
- Are you seeing trends in the numbers contained in your financials and internal metrics?
- Are you happy with what you see? What would you like to change?
- Based on the above questions, what is your business plan for the rest of the year?
To illustrate the value of this kind of information and how to use it, let’s look at one aspect of my business as an example.
- My revenue is up greater than 15% year over year. The plan called for 25%. A little short of plan.
- The number of new clients developed from partner referrals has not increased appreciably. That fell well short of plan.
The increase in revenue has come from:
- Client referrals, extensions and re-engagements. These have exceeded plan.
- Price increases that were long overdue, now that the business has presence and is sustainable. This is per plan.
- Implementation of very target niche programs and products is growing organically. I hadn’t counted on this. Nice to see, but needs direction.
- My value per client has increased consistently. This is per plan.
Is your business getting these 8 essentials right?
Take the Assessment to Find OutIf you knew nothing about my business, what kind of questions does the above data raise?
What kind of actions should I take because of the above data?
The point to all of the above is that…
because of how I measure my business, I have some insight into what is really driving my business.
With these insights, I can make plans and take certain actions to improve business performance. Actions that would not be evident if I just looked at number of clients and top line revenue MTD & YTD.
Are you measuring key metrics within your business? What would you do differently and what actions could you take if you had key performance measurements for your business that told you what was going on in key areas of the business.
When you operate a business, there always seems to be more things to do than time to do them. With key metrics, you can focus on areas and actions that will have the most impact on business performance. You can make changes in what you are doing and fix things that are not working per plan. You can do less of what isn’t working and more of what is.
