I ran a poll which asked what entrepreneurs really wanted to know about. By far, the most popular response was about measuring business success and given that we manage what we measure, I knew this was a good choice!
Now, I know what works for my clients and I and in a nutshell, it’s about being able to quickly get an understanding of what’s going on in the simplest way possible. So, I’ve listed three top tricks to gauge how well (or not) your business is performing. Enjoy!
?Be your own competition!
Knowing whether something is successful or not is all down to your own definition of what success means to you. For some, financial success could be about having a business that “washes its own face,” and by that I mean that it’s sales can support its costs and maybe even be reinvested to buy an asset that makes the business grow. For others, it might be about having a business that pays them enough to cover their personal expenses or maybe match their last employed salary.
However for many, it means pushing boundaries. Going further and reaching higher than ever before. It could mean making that first million, and anywhere in between. So set your goals, write them down and get ready to be a goal getter! And if you need a hand, check out my blog on writing a financial strategy.
?Recognise the little things
As with anything, it’s not just about the destination, it’s what happens along the journey and when you run your own business, small interim milestone are really important, particularly to keep the fire in your belly when the road seems long. Work out what these might be so you recognise them when you see them.
Small goal examples:
- getting your admin done on a regular basis
- writing a potential client hit list
- winning a new client!
- negotiating a better contract
- not going into an overdraft facility
- sending money to a savings account
- investing in a business coach
- outsourcing a function of your business that was previously taking up to much time
- hitting a target!
?Keep it simple!
Clearly define how you’re going to measure your goal. HINT If it’s too complicated, takes too long or requires a spaghetti junction of spreadsheets, you won’t do it, guaranteed.
Decide where you are going to get the data from that will help you. Using a cloud based book-keeping system like Xero will quite literally spit out the information you need. Pick a small number of measures to start – say, 3 to 5 from the list below or one that it is more important or specific to your business.
Measures for success (see business lingo for definitions)
- ?Revenue per person
- ?Sales target
- Ensuring no one client accounts for more than 30% of your total sales
- Staff wages as a % of sales
- ?Cash balance at a certain level
- Number of days it takes to get paid
- Number of days it takes for stock to be bought and then sold
- Gross and / or net profit (as £’s or as a %)
- ?Comparing your actual results against your targets
This list is obviously not exhaustive. Click here to see how work some of the above out.
?Make a commitment to yourself and your business to adopt some really good business habits with these affirmations:
- I am going to complete financial admin by 10th of each month and spend one to two hours looking at the results.
- I am going to set a sales target for each month of £10.000 (all business, insert whatever feels right for you)
- I am going to mark up all products for re-sale by 2.8 (retail outlet)
- I am going to make sure I spend no more than 30% of sales on wages (cafe)
- I am going to invest 10% of my sales in marketing each year
- I am going to pay myself £5,000 each month.
- I am going to make 15% of my sales as profit (net profit)
Whatever you do. Make sure you give yourself praise where praise is due and use any negative outcomes to improve and fine tune your business. Don’t expect Rome to be built in a day so build time in to achieve any jump in sales or other big change in business performance. It’s the key to success and peace of mind for sure!