There’s no doubt the pressure is on for all businesses to perform better than ever before. The media is pretty bleak about economic growth and fellow businessmen are only too happy to engage in tales of woe. In such a climate the temptation can be to bury your head in business – focusing on getting the work done rather than monitoring growth and planning the future.
As the accountants and financial advisors to over 2,000 businesses in Essex and East London, we can say with authority that businesses are doing well in this region. Some are holding their own, while others are finding opportunities to grow – even in reportedly depressed sectors.
This is why it’s essential that you take the thousand foot view, stepping away from the minutiae of daily business to assess how well your company’s doing and where it’s headed. In this article we’ll offer some practical suggestions on how to step back and take stock.
Remember that business plan?
A business plan should be more than just a compliance exercise to secure funding. It should be a dynamic planning tool, of a workable length, which provides a current assessment of your specific goals.
At CBHC we’ve found that a planning tool called the ‘One Page Plan’ works really well – effectively collating all the most important data on a single sheet. This service is administered by our Business Advisory Team and the plan is regularly updated to inform general planning and board meetings.
An effective business plan will contain a timeframe for meeting targets, identify key competitors, and list achievable financial goals. The idea is that all the important data relating to your business is held in one place, ensuring clarity and confidence.
Set the goalposts
Not all business departments lend themselves to a neat financial target, such as to increase revenue a percentage within a defined period. This can be frustrating, as employers are left without a tangible way to monitor progress and plan improvement.
We work with clients to overcome this obstacle by setting key performance indicators (KPIs). Anything important within a business can be expressed numerically – such as customer retention, average customer spend, debtor days, or the time it takes to complete a process. Working out what the KPIs should be can be tricky, especially if you’re immersed in the business, however this is where we can step in as objective advisors.
Because we work with so many different sectors, and are constantly talking to small and medium sized firms, we are ideally placed to work with you to identify key areas that can and should be measured to optimise overall performance. Once established, these figures should form part of the One Page Plan, giving the business plan more relevance and practical value.
Don’t go it alone
The owner or manager of a small to medium sized business wears a lot of hats, including financial director, HR manager, operations director, and so on. But when it comes to collating and reviewing the data for business performance, it makes sense to delegate.
In a smaller firm, every staff member has a vested interest in its success. Indeed, one reason why talented people are drawn to SMEs is that they have the opportunity to play a more integral and interesting role. Having decided what the KPIs will be for each department, why not assign the appropriate people to monitor them and present the information at regular planning meetings? After all, KPIs aren’t intended as a way of catching people out. Their purpose is to give everyone more focus and provide a way for success to be acknowledged and celebrated.
A traffic light colour scheme can be an effective way of making sure these meetings run efficiently. Green, red and amber marks against the metrics will instantly highlight areas for attention. Committing to regular meetings is a central part of this strategy, particularly if several KPIs are in the red, but the benefits are an early warning system, a culture of open discussion and mutual support, and the peace of mind that’s associated with knowing exactly where you stand.
In times like these you batten down the hatches at your peril. The temptation may be to take stock and ride out the storm, but it’s essential to keep abreast of competitor activity and industry developments. Companies are continuing to innovate and you need to make sure your business planning is a focused on the future as well as recent performance.
In addition to analysing your progress against the business plan and KPIs, make sure you track business trends – both in technology and service orientated industries. We provide a benchmarking service to help you do this – we can tell you who the best and worst performers are in terms of sector, size and area, and how your business compares.
Not only is it vital to know who the movers and shakers are, but competitor benchmarking also gives you another way to measure your own success. Your monthly profit may seem low, but if your competitors are in a loss situation, there’s reason to feel good about your relative success.
These are just some of the techniques you can use to maintain an accurate picture of your firm’s status. At CBHC we recognise that accountants have more to offer than compliance, and that the financial services we offer should actively support business development. To find out more about measuring success and general growth, please contact our Business Advisory Team.