Posted on 15/02/2016, 10:27
Twice a year, in the budget and autumn statements, the Chancellor of the Exchequer has to give account to Parliament for the progress of his economic plan.
Successful businesses hold themselves to account against their plan too, often monthly or quarterly. Both presuppose that there is a plan that has clear and SMART objectives.
The reality for many small business owners is that the ultimate measure of success is their accountant telling them they have made a profit at the end of the year and then being able to take a dividend . The plan is essentially more of the same and there are few if any real metrics in place with which to assess whether goals have been achieved.
At best this leaves the progress of the business during the year down to gut feel and intuition, leaving it vulnerable to market changes, competitive action and other events. At worst it is like a rudderless ship drifting on the ocean where the destination is uncertain and sand banks and other hazards lie in wait.
The chancellor’s progress is measured by external bodies, including the Office for Budget Responsibility (OBR). A business owner needs to create their own accountability measures that provide a yardstick for the progress of the business towards its goals. For example if the goal is to grow profitably then the following 3 measures may be appropriate:
The above are just examples. The key is to understand your own business goals and then set realistic but stretching targets that are relevant to the plan and by which you can chart your progress. As with the Chancellor, this is best done in a formal manner, taking time with your fellow shareholders or management team to consider what the measures are telling you!
In or last article, “Measuring What’s Important” we discussed key performance indicators or KPIs. There are lagging KPIs such as financial measures that tell you what just happened and leading KPIs that indicate what your financials are likely to look like.Read More
Following on from our previous blog in this series, “The Most Important Thing”, the next step is to translate your goals into action. For this, setting your targets and measuring your performance against them is vital to making them happen.Read More
What do you want to achieve in your business? Every owner manager had their reasons for why they started out on that journey – what are yours? And more importantly, are they still valid, are you on track, or are your hopes and desires being frustrated?Read More