Measure performance and set targets
Advantages of reviewing business progress and target-setting
Measuring your business performance and setting targets are important processes for helping your business to grow. Many small businesses can run themselves quite comfortably without much formal measurement or target-setting. However, growing businesses need to control these processes, especially if they want to:
- expand the business by taking on more staff
- create new departments within the business
- appoint new managers or directors
Benefits of strategic business reviews
Strategic business reviews are useful if:
- you are uncertain about how well your business is performing
- you want to know how to get the most out of your business or market opportunities
- your business plan is out of date - eg you haven't updated it since you started trading
- your business is moving in a direction different to the one you had planned
- the business is becoming difficult or unresponsive to market demands
If you feel that your business needs to change in order to thrive or respond to market demands, consider implementing a formal change management process.
Setting targets for performance measures
Knowing how your business performs across the different areas can help you assess its strengths and weaknesses and find things you can change for the better. This should help you manage your performance proactively and efficiently.
However, in order to get the right information, make sure that you measure the correct areas of your business. These are known as key performance indicators (KPIs).
Which KPIs should you measure?
You should measure non-financial indicators as well as financial ones. Consider:
- your customers - eg how many you have, how often they use you and how many customers you have lost or gained
- customer service - eg waiting times for assistance, complaints, or reasons customers have complained
- market share - eg if your share of the market is increasing or decreasing against competitors
- your staff - eg satisfaction levels, work quality or attendance records
See more on deciding which key performance indicators to measure.
Benefits of setting targets
When you identify your KPIs and find the best way to measure them, use them to set your performance targets. These will give everyone in your business a clear idea of what they need to aim for, individually and collectively.
Break your main strategic goals down into smaller targets to make them easier to manage. By doing this, your smaller targets become more like day-to-day operations which, once completed, move you closer to your final goal.
Setting the business strategy
To set a clear business strategy, consider looking at:
- Your business direction - where you are now, where you want to go over the next three to five years and how you intend to get there.
- Your markets - now and in the future. Look at what markets you should compete in, how you can achieve this, and how these markets will change in the future.
- Market advantage - ask yourself how you can gain an advantage over your competitors and outperform them in your chosen market.
- Resources you need to succeed - the skills, assets, finance, relationships, technical competence and facilities you need to compete. Determine if these are likely to change in the future.
- Business environment - including internal or external factors that may affect your business' ability to compete.
- Measures for success - performance measures may change as your business matures.
You may not be able to answer these questions on your own. Consider asking input from professional advisers, fellow directors or senior staff to make your business review more effective.
Find out more about strategic planning for business growth.