Do you measure the success of your business solely in terms of profit and loss? This is crucial information, of course, but to get a truly accurate measurement of the state of your company’s financial health, consider broadening the scope of your analysis.
These four tips will help you assess how well your business is performing:
- Identify your business goals
- develop Key Performance Indicators (KPI’s)
- determine appropriate metrics
- measure business KPI’s.
After identifying business goals, settling on KPI’s and metrics we can see if a business is performing well. When we zoom in on the metrics we can see relationships between KPI’s and business outcomes where attention can be given to those which may be performing poorly. We can also learn from those which are performing very well and look for an opportunity to further invest in growth.
1. Identify your goals. What do you aim to accomplish? Significant goals may include increasing market share, improving customer retention rates, and generating a higher volume of online traffic. In any case, until you know what you want, you can’t measure what you have.
Write down your goals in as much detail as possible. What percentage of market share do you want to achieve? By what percentage do you want to improve sales conversion rates? Goals should present challenges to your business, but none that you can’t reasonably hope to accomplish.
2. Develop key performance indicators. Most businesses rely on financial statements and sales results as their primary indicators of performance, but you can develop many other “1KPIs” that fit your particular enterprise.
Where are your company’s strengths and weaknesses? By focusing on specific indicators, you can measure performance against the goals you’ve identified. KPIs track performance, thus leading the way toward improving performance where it’s needed most. In this way, you create a history of how well your business performs over weeks, months, and years. From this history, you’ll be able to quantify success and make note of warning signs where changes are necessary.
