By Jenny Lukas, AVN.
You probably know the expression, ‘What gets measured gets managed.’ And it’s absolutely true. When you track a figure – monthly sales volume, for example – you want to see it improve so that’s where you focus your time and effort. And that’s why it’s crucial to be certain you’re measuring the RIGHT things.
Why should you measure things in your business?
Measuring gives you the information you need to effectively manage your business. It helps you to identify areas where you can improve efficiency. It helps you to understand whether your customers are happy or not. It allows you to spot problems early on so you can deal with them before they start to impact your business.
Measuring and reporting on the key figures for your business makes it easy to share information with your team. When they can see the metrics that are important to their role it helps to motivate them and make them feel involved. Working towards a common goal together becomes easier when you all understand how the business is performing.
But only if you measure the right things.
What are the important things to measure?
Many people assume that you have to measure everything; if it moves, measure it! But if you do this, you can end up measuring the wrong things, drawing the wrong conclusions and wasting your time. Just because something is easy to measure, it doesn’t mean that you should.
One of the most obvious metrics to measure is your financial results – your profits and so on. But the clue is in the name – these are the results of what you do in your business, the consequence of getting other things right. Yes, you do need to measure these figures to understand if you are profitable or not, but they are not the most important things.
Your underlying success drivers are what really count. These will be different for each individual business so you need to identify what matters in yours (ideally you should only be measuring around 7 or 8 things). What do you do to drive your sales? What’s driving your costs? And your cash? Measuring these key underlying success drivers shows you what’s really going on.
Align with your vision and goals
There’s also one extra point that I think is crucial. You need to make sure that what you measure ties into your goals, your purpose, and your vision for your business. When you do, as your key metrics improve, you’ll know you’re progressing in the right direction. So before you start identifying the key success drivers for your business, you need to have a clear picture of your goals. What measurements will help to bring you closer?
Start thinking about your business vision, purpose and goals. What systems can you put in place to measure the key things that will move you towards these goals? Take the time to really understand what’s important and what really impacts your results. Once you do, you can move forwards with confidence.