An entrepreneur who wants solid proof of the success he feels when he wakes up one morning is definitely on to something. There’s no denying the fact that business is booming when clients start seeking it out and customers refer its products or services to others.
An owner will probably say he can smell it and his employees may sense excitement in the air in a bustling company, but numbers give a very clear picture of a successful business. New clients could mean a wider market reach while referrals show customer satisfaction, but can the company track how far and how many?
Metrics provide any small and medium enterprise (SME) the concrete evidence for its success. At the minimum, when the annual reports show that the profits exceed losses, even if a quarter or two are in the red but the next period makes up for this, then the company is doing financially well.
Monitoring financials are key in gauging business performance but there are other success factors to watch for, especially for startups that have yet to realize earnings. It is important to recognize the company’s potential. If it is posting steady growth, which could be verified if sales or revenues and job orders or new customers are regularly tracked, then it is on its way to succeed.
KPIs: Know what makes it tick
Tracking and measuring key performance indicators (KPIs) are relevant not only to quantify success but also grow the business further. It will tell the entrepreneur what works for the company so he can continue this or replicate it in other aspects of the business. It will also pinpoint areas for improvement to correct errors that are costing the company.
Aside from finance, KPIs are measured in operations and administration. KPIs can be set in human resource, marketing, production and sales or any area of the business, to closely watch their output and check these against the desired results.
Examples of KPIs are number of job quotes, order fulfillment cycle time, customer feedback, churn rate, average resolution time, social media reach, employee turnover, on-time delivery, advertising response rates, best and worst selling items, sales cycle length, trial downloads, activity effectiveness, waiting time and stock turn rate.
Such information are crucial to understand the strengths and weaknesses of a SME and keep it focused on problem areas. Knowing the specifics arms the business owner with relevant knowledge to improve weak points or set things in the right direction and make informed decisions.
Track and measure results like clockwork
Every business should identify its success factors and translate these into quantifiable KPIs that can be measured and tracked on a weekly, monthly or quarterly basis to bring the company closer to its near-term goals and long-term plans for growth.
It pays to know if it isn’t working out or what works best so the entrepreneur can address challenges before things get bad or respond to opportunities lest these pass him by. One such software that offers a snapshot of key figures and business performance is MoneyWorks, a comprehensive accounting and business information system for small businesses to large companies.
MoneyWorks allows easy and quick access to simple transactions up to complex sales figures. It can even instantly tell the owner which business units are raking in the revenues and those that are poor performers. Overall, it gives one a better handle on the roads leading to the company’s success.