How do you measure business success?
Once you have been running your business for a while, it can be difficult to gauge how well you’re doing against your own goals and in comparison to other companies in your marketplace.
Here is Panthera’s guide on how to measure the success of various different aspects of your business.
Look at your financial statements
Assess your income and expenditure and see how they stack up against each other. If you are operating at a profit and your costs don’t seem to be running away with themselves, then it might be difficult to see anything that needs changing. But therein lies the danger – you should look a bit harder to see what’s really going on.
Create a cash flow forecast
A cashflow forecast predicts the amount of money that your business will have to hand at any point over a given period. The financial period in question can be anywhere from the next quarter to the next couple of years. The longer the period of time, the more difficult it will be to put together but it’s worth doing nonetheless.
To do this, take the financial data from the last couple of quarters and analyse them to discover any trends. If, over time, they show that your business is making lots of sales and collecting the cash fast enough to outpace your expenditure, you’ll have a surplus of cash that is likely to continue to rise.
Of just as much interest as what’s coming in will be what’s going out. A cashflow forecast gives you the opportunity to examine all of your expenditure items – the ideal opportunity for you to question whether you need to spend money with that supplier or not.
If business is all about getting the highest possible reward for the least amount of work, cutting back on unnecessary expenditure means that your breakeven point each month will come sooner and that, on the same level of sales you’re making now, a better return.
Check your customer satisfaction
This is more difficult to measure but your business should strive for the greatest number of positive comments and feedback as possible, whether direct to you or on an internet ratings site. If your customers are happy with the service that you have provided, encourage them to leave positive feedback where other potential customers might see them.
The same can be said in reverse. If you have an unhappy customer (don’t worry, this happens to the best of us), then make sure that you address their complaints directly. Doing so will allow you to salvage future sales from that customer by giving them the peace of mind knowing that their concerns have been properly dealt with.
Check your staff turnover rate
Constantly having to fire and rehire staff is expensive financially and demoralising for your staff.
If you find yourself repeatedly replacing members of staff, you will spend a lot of time, money, and effort on training up new employees only to lose them a little while later. Staff generally tend to underperform if they feel their positions are under threat – you might think it would motivate them to greater things but the evidence suggests otherwise.
According to Monster, the UK average employee turnover rate is 15%. It varies greatly between different sectors – E-days have kindly provided a breakdown by occupational group – click here and scroll down the page to see it.
To discover what your company’s staff turnover rate is over a year, add the number of employees you had at the start of the year to the number of staff at the end of the year and then divide the total by two. Then divide that figure into the number of employees who have left over the year. Then multiply that result by 100 to get your staff turnover percentage figure.
Compare your business to your competitors
This is best done in two stages. Start by looking at your business when you first started out. How did you stack up against your competitors? What advantages and disadvantages did your business have in comparison?
Then look at your business now. What has changed? Do you have a larger market share? Have they got a larger social media following?
Examining your competitors over a period of time will also give you a good idea of which areas you are successful in, how far you’ve come over that period of time, and those areas where you need to improve.
We can help
If you’d like help and advice on measuring the success of your business relative to your own goals, we’d love to talk with you. Call us today on 01235 768 561 or drop us an email to firstname.lastname@example.org – we’ll be back in touch with you shortly.