Your business results, especially the financial results of Sales/Revenues, Profits and Cashflow, reflect what is an isn’t working in your business. Basically, your financial results are a performance metric on how well you are generating results for your target customers. Are you:
- Reaching the customer
- Making pitches for the sale
- Closing the sales
- Delivering the products and services
- Delivering the benefits the customer expected (creating value)
- Administering the business in a cost effective manner
- Utilizing and maximizing capacity
- Managing your resources
- Paying bills
- Accounting for transactions
- Monitoring your competitive environment
- Adapting to changes
Decide on YOUR Performance Metrics – Align Your Organization
Your Results and the performance metrics you establish to monitor your progress have to be aligned and tied to your business goals. What goals does your business have? Typical goals include the financials: Sales/revenue $ and growth % year-over-year, profits $ and Gross and Net Profit Margin (as % of Sales), and cash flow (cash conversion rate in days).
Other goals may relate to:
- Employee retention
- Days of accounts payable outstanding
- Inventory turns
- Days of accounts receivable outstanding
- Number of leads generated
- Number of quotes issued
- % of sales made versus quotes and leads
- Sales per sales team member
- Sales per employee
- Return on Investment
- Return on Assets
- Customer satisfaction
- Customer repeat sales
- Average Sale
- Customer retention rate
Align Metrics with Values and Goals
The metrics you choose should be a reflection of your goals, culture and values. They must include financial metrics. I recommend to every client to track what I view as CORE metrics – revenues, profits and cash flow, because your results have to generate the ability to stay in business. Tracking your CPR (cash-profit-revenue) will keep you cognizant of how your business model is working.
I also recommend to clients that they track key performance metrics that feed these core metrics. For sales, you will want to monitor the processes that feed sales. So this may mean setting metrics related to qualified leads generated, sales calls made, and quotes issued.
For customer service operations, you will want to keep an eye on customer satisfaction.
For overall business success, you will want to monitor employee turnover. You may even use employee satisfaction surveys periodically.
Whatever your business, you want to keep an eye on the areas that will make or break your business. You will want to identify and set performance criteria and targets that enable you to establish priorities and align resource usage to those goals.
Focus on generating great results for your customers and serving them well. Build a business that values the customer and your team.
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Articles and Podcasts
- Cost Versus Revenue Focus (10/3/2016) - The challenge of growing a business includes determining which aspect of managing financial performance should take top priority. I have worked in organizations that focused on costs and others that organized around profit centers. There are benefits and drawbacks to each. How you choose to focus your business performance toward costs, revenues, or a combination depends on your business, how and where it operates, the industry, and a number of other factors. The Cost Perspective: Control, Prevent, and Eliminate I’ve worked in and with many businesses with a cost focus. Working from this perspective, they would manage the cost of ...
- Organic or Cultivated Clients? Which Do You Want? (9/23/2016) - These days the term “organic” seems ubiquitous. Organic has come to mean more than the traditional dictionary definition. In this instance, I want to talk about organic growth as it relates to a natural process that is without direct intervention or influence. Looking at that definition, let me clarify further. Organically Grown Let’s say you decide to open a retail store. It could be just about any retail product, but let’s say it is a clothing store. Now if you locate that clothing store next to a large retailer, say a grocery store in a shopping mall, you will have ...
- Haste Makes Waste: Do It Right the First Time (9/21/2016) - Haste makes waste is a common saying. Another common saying is time is money. Time, like money, is always in short supply in organizations. Every moment is precious, so the question is: “If you don’t have time to spare, how do you have time to fix a problem when you did not have time to do things right the first time?” Now, I recognize that every person and business will drop the ball at some point. It is simply human nature that sometimes we will lose track of a commitment, have an accident, or Murphy’s Law will come into play. ...
- Where is Your Business Located? Realist Road (9/14/2016) - Normally when I am writing about the location of your business, I am focused on the physical or virtual locations of the business. Today I want to focus on the mental or psychological location of your perspective on your business. In working with clients, the success of organizations is impacted by their leaders’ perspectives on events, opportunities, results, and the future. Leaders tend to locate their businesses one of three categories: Optismist Overlook, Pessimist Place, or Realist Road. Welcome to Optimist Overlook When you visit Optimist Overlook, the business may reside at the corner of WishfulThinking and Hope Is My ...
- Strategic Plan: Your Five-Year Roadmap to Success (9/7/2016) - Too often, the owners of many businesses of all sizes and industries don’t see the need for a strategic plan. They make critical decisions on which deals to do, what systems to put in place, and who to hire based on the current vision of the business. They focus on the near term of the current year or at best the year to come. In the past month, I have met with non-profits and for-profits who have yet to even think about a budget for next year, let alone a five-year plan for their organizations. When pressed for revenue and ...
- Check Your Priorities: Real World Lessons Learned (8/17/2016) - Many years ago (I won’t say how many), I had a new boss (we’ll call him “Kevin”). He was actually my supervisor’s boss. Kevin had spent most of his career in communication roles (he created presentations and documents to give to the board.) When Kevin came from a part of the organization whose priorities were presentations (pretty ones) into the department I worked for he was coming into a working group that on a daily basis created transactions that enabled the business to produce products. In my case, I had double duty working with two different groups as their support ...
- Business Danger Signs: Is Your Business the Frog in the Pot? (6/18/2016) - A business danger signs may be ignored or unnoticed, much like a frog in a pot of water on a stove. Yes, I am talking about the the experiment with a frog and a pot of hot water. If you put the frog in the pot and the water is boiling, he hops out fast! But when you put the frog in a pot of room temperature water and then turn on the heat, he won’t notice the gradual rise in temperature and fails to hop out. The gradual rise in temperature prevents the frog from recognizing the danger signs. (Okay ...
- Is the Glass Half Full? Half Empty? Or is it the Wrong Glass? (6/14/2016) - One of my friends was telling me about a discussion she had with her eighteen-year-old son. They were talking literally about a glass of Dr. Pepper. “Is the glass half full or half empty?” she asked her son. He said he thought she just used the wrong glass. If she had used a smaller glass, then she wouldn’t be thinking is the glass half full or empty. It would be full. This difference in how we look at things makes an important point for businesses when it comes to capacity, staffing, and all the elements of being in business. Perhaps ...
- Sales Constraints – What’s holding us back? (6/6/2016) - ARE YOU OPERATING AT peak performance? Do you spend more dollars for less return? When you invest to expand capacity, does it translate into more results (revenues and profits)? If not, you’re investing in the wrong option.Here are 10 constraints: lack of clear business objectives; lack of specific performance objectives for teams and individuals; the goals for teams and individuals don’t match the organizational objective; compensation (tangibles and intangibles) reward the wrong behaviors; lack of corrective action for poor performers; lack of role definition in achieving objectives; investing in places that don’t expand capacity; inability to execute the strategy because ...
- Five Critical Steps to Maximize Resource Flexibility (5/26/2016) - Article previously appeared on Mainstreet.com (2009) Companies of all sizes have historically relied upon their workforce to provide the flexibility necessary to compete. Unfortunately, compensation and benefit costs have created a dilemma - business can’t afford to commit to full-time, permanent employees. While competing means responding to customer demand, it also means not committing too early (or permanently) to resources you only need for a short time. Scaling Up Your Business To grow the business you must find the balance between putting in place the resources needed to grow and the cost of those resources. Move too early or too ...