The first area that my clients and I spend time on when we start working together is mastering the fundamentals of running a business. And, key to having a healthy business is managing your money, your time and the consistency of your delivery effectively.
Why are the fundamentals so important? Well, it goes back to the old saying, “You can take any road if you don’t know where you are going”. Setting goals and measuring your team’s progress (or lack of progress) toward those goals will determine your course and eventual outcome. And, if you don’t test and measure your results, how do you really know what is working and what isn’t?
Start by setting your Key Performance Metrics (KPMs). You should have no more than five to seven measurements that act as business drivers. Tracking the number of clients you have, sales you generated or profits you attained are obviously important, but they are results, not drivers. Rather a business driver is a metric that you can act upon that will impact your bottom line performance.
For example, your average dollar sale, the average number of times your clients purchased are from you and your profit margin are drivers. A good rule of thumb is that unless it makes a difference and can be acted upon, it is not a key performance indicator (KPI).
Start by tracking and trending your financials. Learn how to use your income statement, cash flow statement and balance sheet and, more importantly, tie your actions back to them. Second, track the key business drivers or leads per month, your conversion rate, your average dollar sale and the number of times your customers buy from you. Third, have one or two satisfaction and productivity measures; find and track the ones that increase productivity and customer satisfaction at the same time. Improving your KPIs become your priority. And if they are your priority, they will also become your team’s priority.
Set a goal for each KPI. Compare your actual results during the reporting period to the goal or budget. Have your team get in the habit of explaining why there is a variance and, if negative, what action is necessary to improve. If positive, discuss what you did to obtain those results and make sure you continue with them.
Once you start getting into the habit of managing your fundamentals this way, an amazing thing happens. You start using your information to manage proactively instead of reactively. Once that occurs, you really take control over the results. You will become an expert in running your business, not simply an expert in delivering the product or service.
Brad Sugars founded the brand Action International in 1993 when he realized there was a disconnect between business advice and implementation. The answer was Action! Brad Sugars created a business coaching company so that business owners throughout the world can realize their goals in business. Today the company is known as ActionCOACH. To learn more about business, visit Brad Sugars Review blog!