How to Know Your Business is on Track
If you’ve just started a small business, or are trying to help your business grow, read on for a look at how you can best measure the progress of your company.
A lot has been said and written about how difficult things are right now for new small businesses and more established enterprises that are looking to grow. The economy is still in a precarious position, and trading conditions are difficult, but success and growth are possible to those who have the determination and focus to get ahead.
Central to this success is the ability of a business to understand both how it’s performing and what progress it’s making as it moves towards its goals. Crucial to this is the establishment of relevant Key Performance Indicators (KPIs).
If you want to ensure that you are making the right decisions for your business, you should make sure that all the KPIs you’ve set, and will set in the future, are suitable for your business needs. Doing so could make the difference between business success and failure.
The Keys to Setting Effective KPIs
There are several factors that you should consider when setting your own KPIs, and many of these factors will be specific to your particular needs. However, there are some background issues that can guide any business owner in their setting of KPIs:
- Take stock of your situation: At what stage of development is your business? Your KPIs will be very different depending on what stage of the business journey you’re currently on. If you are just starting up then cash flow may well be your most important KPI but as you look to grow, you should broaden your scope to include factors related to the management of the business.
- Be realistic: You KPIs should feed in directly to your business decision making process so be realistic about what you expect to discover when you measure your progress. If you aren’t fair in the appraisal of your business then you might get a nasty shock when your KPIs come in but this should be easily avoidable.
- Make sure your data is relevant and accurate: A measurement is only as good as the data that it is based on so scour all your sources to find the best information you can. Internet technology has put more knowledge at our fingertips than ever before but this can lead to an information overload so ensure you go to the right sources. For example if you need information on your utility usage, your energy provider can give you relevant figures.
- Look to the future with an eye on the past: When you’re setting your KPIs you should include some of the results that you’ve already achieved as part of your planning. This information will allow you to track your progress in any given area, allowing you to develop a clearer sense of what direction your business is going in and what sorts of goals are achievable in the future.
Using Your KPIs
Measuring the progress of your business will prove immeasurably helpful in directing your business. Information from your KPIs can help you to identify areas where potential growth is possible, and can flag up parts of your business that need to be looked at more closely.
The future is like a foreign country – we may have a fair idea where we want to go with our business but we can never be certain of the route. KPIs are like landmarks which can signal that we’re going in the right direction or that we need to try another course. Be flexible in your application of the indicators and don’t be afraid to change course if you believe that’s what’s needed. Doing so could mean greater growth in the future.
How will you use KPIs to help your business going forward?