martes, 8 de noviembre de 2011

How to judge the progress of your business

When you’re totally immersed in the minutiae of your business, it’s hard to step back. But, if you want to gauge the progress of your company, this is exactly what you need to do.

You have to be able to take a panoramic view, assessing your company in the context of its market and competitors, sifting the important details from the mass of data at your disposal.

This guide is designed to help you create a comprehensive strategy for monitoring your business. As your company grows you’ll face a million-and-one concerns, but these tips should stand you in good stead through good times and bad.

Dig out your business plan
Business plans aren’t just for start-ups. A concise, comprehensive business plan provides the backbone of your ongoing strategy, and an obvious reference point for future reviews.

A good business plan will contain a timeframe for achieving all key targets, identify major competitors, and map out sensible financial goals. There’s no point getting carried away; if your business plan isn’t realistic, it’s worthless.

But your plan should not be set in stone either – instead, it should be reviewed regularly, and flexible enough to allow you to adapt your strategy to respond to key changes in the market, such as the emergence of new competitors or advances in technology.

Establish tangible goals
With certain arms of the business, distinguishing good performance from bad can be tricky. While some arms, such as sales, provide a clear indicator in the form of revenue, many have no tangible bottom line. So it’s important to establish key performance indicators (KPIs) for each part of the business. KPIs gauge progress by breaking down each function of the company into its core purposes.

To do this, you need to determine what metrics will enable you to measure performance in each area. For example, if you’re working out KPIs for the accounts department, you might consider the amount of time it takes to secure payment from invoices. Alternatively, for customer services, you might set a target for the time it takes to respond to each enquiry. 

Once you’ve established your KPIs, work them into a dashboard – an at-a-glance overview of the KPIs, tailored to each individual objective. Stephen Clarke, managing director of the Contact Group, a company which provides communication tools for schools and hospitals, says his firm’s dashboard includes:
  • New sales
  • Customer attrition
  • Retention rate
  • Status of existing customers
  • Average debtors days
  • Top 10 debtors
  • Sales conversions rate
  • Average customer spend
  • Gross profit margin
  • Net profit margin
There are several server and cloud-based dashboard solutions available. According to Scott Haddow, CEO of value-added reseller Trustmarque Solutions, “the software should be able to handle multiple data sources, so that it can reach out to all areas of a business and provide as an extensive view as possible.”

Commit to regular meetings
It’s easy to forget the need for regular monitoring sessions among all your other concerns, so it’s important to establish a clear timetable for progress meetings.

Some businesses like to review their progress every month. Scott Haddow tells us that Trustmarque “have a monthly board meeting, and the first page of the pack which goes to the members is devoted to how well we’re doing against the KPIs. This pack goes out a week in advance to each member, with red, green and amber marks against each KPI, depending on how we’re doing. 

“I will cover off the KPIs in the first 10 minutes of the board meeting, devoting most time to the indicators which have red marks.”

However, other companies prefer to spread their reviews out. Gary White, business development director for Essex-based accountancy firm CBHC, says: “KPIs should be reviewed quarterly; it’s difficult to get accurate information every month and each quarter comes along very quickly.”

Ultimately, the timeframe is up to you. What’s important is that you commit to a regular ongoing schedule, which works for you and any other key decision-makers.

Think about the future
When you’re measuring your progress against your business plan and KPIs, it’s important to think forwards as well as backwards. In addition to talking about recent sales and financial performance, you need to analyse future trends – or risk losing your competitive edge. Just look at Nokia – by failing to keep pace with key changes in the smartphone space, the once market-leading phone maker has seen its market share engulfed by rivals such as Apple, BlackBerry and Google.

Whenever you review your progress, factor in upcoming developments such as likely sales and acquisitions, changes in the market, and the emergence of new competitors.

Peter McHugh, CEO of Covalent Software, says:

“Financial measures are what tend to get reported at management and directorial meetings. But these are ‘lagging’ measures, covering what’s already happened, and there needs to be more of a focus on introducing leading indicators, which can help predict what might happen in the future.”

With this in mind, Scott Haddow says you shouldn’t place too much faith in budget variances as a barometer of progress:

“A better solution would be to measure actual, versus forecast, versus budget. This way a management team can assess and understand events on the horizon that pose potential budgetary risks, rather than opting to simply report on issues which have led to budgetary variances.”

Do your research
It’s virtually impossible accurately to gauge your progress without looking at the market; you may be making only £1,000 a month in profit, but if all your competitors are losing £1,000, then it’s clear you’re doing well. 

Meticulous research is crucial in assessing your market, and market share. Stephen Clarke says: “For our target market, we use the most up to date National statistics for England, Wales, Scotland and Ireland to calculate how many schools there are. 

“Once the size of the market is established, you need to establish how many customers your competitors have. They may publish this on their website, or this could be established by calling them, approaching them at an exhibition or obtaining company literature.

Meanwhile Scott Haddow says that specialist analysts, such as Gartner, can provide crucial information. He also believes it’s crucial to seek the opinions of your clients, giving them free rein to say what they think.

“We get customer feedback via verbal or written references, and we spend a lot of time with customers one-to-one. We speak to all customers, not just those we have success with.”

Keep everyone involved
KPIs are all well and good, but don’t forget to talk to your staff to get behind the numbers – after all, if targets aren’t being hit, they’re likely to have a good idea as to why this is, as well as some useful insights on how to boost performance.

For Scott Haddow and Trustmarque, “frequent, open and transparent communication with our staff” is crucial. Trustmarque holds formal all-hands monthly company meetings, reviewing the previous month’s performance against the KPIs, and backs these up with regular informal chats.

Meanwhile Stephen Clarke says: “We regularly go through the performance of the company with the whole group of employees, going through anything that’s up and coming.

“It’s important to involve everyone, just to give them a view of how the business has been evolving. Periodic meetings give everyone an overview.”

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