Tag Archives: strategic planning

Keep Your Business on Track and Growing: Measure What Matters

By Laurie Breitner and Karen Utgoff

There is more to keeping your business going in the right direction than looking at standard reports from QuickBooks or other accounting tools on a regular basis. While these reports can give you numbers, determining and appropriately tracking what matters — which numbers are important, how they are derived and what else you need to watch — is an essential responsibility of the owner(s) and management team.

In assessing current operations, it’s often useful to compare today’s results with past performance — prior period (year, quarter, month, or week) or effort (job run, project, or program) depending on your industry and particulars of your business. While this isn’t always possible for newer ventures, be assured that if you are diligent, ultimately these measurements will help reveal your company’s strengths and weaknesses, opportunities and threats, as well as performance.

For example, after one year in business you can only guess how seasonal factors will affect your cash flow. However, if you keep track, with five years experience you will be confident in anticipating how seasonal ups and downs might impact your business. When you hire a second employee in a particular role, you have some idea of how long it will take them to come up to speed; by the time you make your fifth such hire, you have a much better idea of how long it should take, as well as what it takes, to be productive.

For new initiatives, measuring is tied closely to looking forward (planning) for likely and intended outcomes. What will initial success look like? What events (milestones) are critical to track progress? How much will it likely cost? Are there gaps in your capabilities or resources that need to be filled before you can realize the potential of the new initiative? How much revenue and/or profit is the project expected to add and when?

What initial operational measures should be monitored? Here’s where it’s helpful to look at assumptions you made in making predictions. Did you assume that if you opened a second location in a nearby town that your strong positive reputation would automatically give a boost to the new site? Did your plan hinge on getting speedy municipal approval for a larger parking lot at the next planning board meeting? What key assumptions do you need to track?

Add to the standard routine of just reviewing (daily, weekly, monthly, quarterly, and annual) results with the following specific approaches that are critically important to measuring what matters:

Assess profitability and the fully allocated cost of goods sold from an operational perspective: For background review pages 8 and 9 of Laurie’s Thriving: Get and keep your business on track. Also, check out Karen’s Succeeding in Small Business post on Four tips for putting your business plan to work for your small business.

Project results for new initiatives with limited or no experience: For background, read Four steps to help small business owners evaluate the financial wisdom of new business-building initiatives and Small business management and entrepreneurship: Two key ingredients for sustaining success.

For additional information read Josh Patrick’s article on Every Business Has a Special Number, or Metric. Do You Know Yours? in the NY Times’ “You’re the Boss” blog and A Winning Culture Keeps Score by John Case and Bill Fotsch in the HBR Blog Network.

Here’s how to get started: On a single page, document the (up to) five most important measures, metrics, milestones, and/or numbers that you follow (or plan to track) to gauge whether you are on the right road, moving into the fast lane, or facing an unwanted detour. Review these metrics with your management team, board of advisers, mentors, and/or appropriate professional services providers. Evaluate them regularly to make sure they remain relevant guides for growing your business. Plan to fine tune them over time as your needs and business landscape change and you learn more.

© 2015 Laurie Breitner and Karen Utgoff. All rights reserved.

What’s So Special about You?

I could not have anticipated that a taunt I first heard in grammar school would be a question I’d later ask business owners in all seriousness. Businesses are most successful when they build upon their unique strengths and take appropriate steps to mitigate critical weaknesses.  But recognizing your strengths and weaknesses is easier said than done. Here is an overview.

While it would be impossible to enumerate all attributes an organization might have, the following list will get you started.  As you consider your organization’s strengths and weaknesses, please be absolutely honest.  It’s easy to think only in positive terms, to see only potential or to obsess over weaknesses. However, giving in to one-sided thinking will not result in actionable information. Better to recognize any areas that need attention as soon as possible so that you can address them before they negatively impact your bottom line. On the flip side, don’t fail to recognize where your organization shines. This may lead to discovery of competitive advantages that will help your business to leap ahead.

Expertise/industry savvy and contacts

  • Unique capabilities – what can your organization can do/supply that is not available from competitors?
  • Experience/knowledge of principals and staff – do you offer customers an extraordinary level of expertise or experience?
  • Industry ties – do you belong to and actively participate in industry associations?
  • Influencers – do you regularly engage in two-way communication with industry influencers?
  • Media – would it be likely for the media to contact you were there to be a breaking story in your industry?

Customer base

  • Customer satisfaction/fans – do your customers refer or recommend you to potential new customers?
  • Loyalty – do you receive repeat orders from customers?
  • Diversification – do you have multiple customers in a variety of industries?
  • Are your customers financially stable?
  • Do your customers expect you to compete on price alone?

People

  • Leadership and top managers – is your leadership team complete, respected, knowledgeable and well connected?
  • Overall, do employees have all the skills and qualifications they need?
    • Skill level – does your organization ensure that staff is well trained, up-to-date and knowledgeable?
    • Dedication to quality and customer service – is your organization’s definition of quality and customer service measurable, clear to all members of your staff and considered in every customer interaction?
    • Licenses, insurance and certifications – do you/your staff have all relevant licenses, insurance and certifications?
  • Succession plan/pipeline – do you have a clear succession plan and the means to find and attract sufficient new employees?

Suppliers/raw materials

  • Stable – are your suppliers financially stable?
  • Raw materials – is it likely there will be an adequate supply of raw materials available at a reasonable price?
  • Bench strength – do you have multiple suppliers of key goods or raw materials?

Products/services

  • Are your products and services distinct from those of your competitors?
  • Do you have exclusive agreements to sell products and services in your market?
  • Do you offer a complementary mix of products and services not found at the competition?
  • Is demand for your products and services seasonal and/or tied to events beyond your control? (Weather, subsidies, tax incentives, etc.)

Intellectual property

  • Patents/trademarks – do you own and protect patents and trademarks?
  • Marketing collateral – does your marketing collateral engage and inform your customers base?

Infrastructure

  • Convenience to customers/suppliers – are your organization’s locations accessible to both customers and suppliers?
  • Traffic – if it’s relevant, are you located in a space (either physical or virtual) where your customers are likely to congregate?
  • Visibility – is your organization easy and convenient to find both physically and virtually?
  • Processes and procedures – do you have efficient, documented processes and procedures?
  • Systems – do your systems (computer, telephone, forms, inventory management, etc.) effectively support customers and staff?
  • Technology – do you have all of the industry-specific tools and technology you need to compete for business?
  • Overhead – is your operation efficient?

Financial

  • Financial strength – is your organization on sound financial footing?
  • Banking relationships/access to credit – do you have on-going positive relationships with one or more banks that would be willing to extend credit?
  • Positive cash flow – overall, is your cash flow positive?
  • Terms – are you offered and do you take advantage of suppliers’ best possible terms?

Culture

Culture significantly influences an organization’s ability to attract and retain employees, respond to problems, and to provide a great customer experience. For more on this, read Karen Utgoff’s recent post on looking at your organization’s culture with fresh eyes.

It is often illuminating to involve customers, suppliers and staff in exploring many of the questions above. You can learn a lot by understanding their views. Also, what might have been accurate in the past may not always be true. Support your assessment with facts whenever you can. Refresh this information periodically, more often if your circumstances (market, customers, etc.) are in flux.

Understanding your organization’s strengths and weaknesses will give you a better understanding of internal capabilities. To formulate a strategy, these need to be considered in the context of the external environment. For more on doing so, see this post by Karen Utgoff on sorting out opportunities and threats.

© Copyright 2014 Laurie Breitner. All rights reserved.