Thursday 27 December 2012

Assessing Your Business Performance


Tuesday 23 December, 2008
A review of your business will identify any areas which are working really well - and any which may require you to take action. Being informed about the real drivers in your business is critical to achieving results and optimal utilisation of all your resources.
How are you going to assess your performance as a business owner? Are you getting any better? Are you improving your skills? Are your business results improving? Apart from sales revenue and profitability, how do you assess performance?
The only way to truly assess your performance is by the results you achieved in your business.
In a more competitive and demanding market, you need to get smart about minimising risks, identifying new opportunities and understanding what drives performance.

Ask yourself these important questions

  • Which product or service lines are most profitable and make the greatest contribution to your business?
  • Do you need to change the mix of your product/service portfolio in any way? (When assessing products or services, think about factors like length of sales cycle, volume of sales, profitability, how easy is it to sell your products or services, repeat sales, support revenue and costs, pricing, cross-sell and up-sell compatibility, etc.)
  • Do you acknowledge and nurture your best customers?
  • Where will your growth come from this year? Will it be from your core business and customers, or from somewhere new? (Where did it come from last year, and was it enough?)
  • Will you be able to fund your growth? What options do you have?
  • Where is the biggest exposure in your business? What needs to be done to address it?
  • Do you have the right systems and infrastructure in place to support your goals and priorities?
  • Do you know what the key measurements are to assess the overall progress and performance of your business, and can you report on that?
  • Do you have the right team? Do you have resource gaps?
  • What changes could I make (as the CEO) in what I do, to improve the performance of the business?
These questions give you somewhere to start as you progress through your report card. Then you need to look into your business and make assessments on what needs to be done to get you to your future goals. Changes may be needed, extra attention may be required in some areas, and you may not even have answers regarding some areas of your business.
Here's a quick report card checklist to assess whether or not you are worthy of an ‘A'! 

Report card checklist

This quick and easy report card will help you uncover the real status of operations and performance in these key areas:
  • Finance
  • Sales
  • Marketing and promotion
  • People
  • Products and services
  • Customers
  • Processes and systems / production
  • Planning and goal setting
For each area, draw up a form with a checklist like the one below (Table A), rating each area as ‘poor', ‘satisfactory', ‘needs work' or ‘good'. Using the above example, record your rating for each aspect identified for the sales area. From this, you should be able to see the most frequently scored rating, and make an overall assessment of the sales area.
Table A
Sales
Poor
Satisfactory
Needs work
Good
Sales revenue
 
 
 
 
Sales tools
 
 
 
 
Sales team use of time
 
 
 
 
Lead generation
 
 
 
 
Pipeline building
 
 
 
 
Forecasting accuracy
 
 
 
 
New customer acquisition
 
 
 
 
Relationship building
 
 
 
 

For example, 'sales revenue' may have come in under budget for the last 12 months (or 6 months, whatever basis you are working on). If it's just under budget, you may rate the sales revenue as ‘satisfactory'. If it came in well under budget you may rate it ‘poor'. If you made budget, but you know you could have achieved a better result, then a rating of ‘needs work' would probably be appropriate, and if you came in well over budget you'd definitely categorise the sales revenue result as ‘good'.
Be objective and very honest when you work through this for each area of your business, and make sure to use criteria that are appropriate for you.
For example, if you sell through a network of distributors, then ‘channel performance' or ‘channel' may be a criteria. If you sell both in your local market and in export markets, you may separate ‘sales revenue' into ‘sales - domestic' and ‘sales - export'.

How do you rate?

In conjunction with this assessment process, it is always a valuable exercise to survey your staff/customers/suppliers as appropriate. They ARE your business and you need to know how you are performing, from their perspective. It isn't necessary to conduct these surveys too often, but they are a useful benchmarking tool to use from time to time.
When you've been through all of the broad functions of the business (such as sales, finance, etc.), give each area an overall rating.  Again, draw up a chart with performance rating across the top, the operational area along the left axis (sales, finance, people, etc.), and tick your ratings in the right columns (Table B).
If an area is generally in pretty good shape, and scored mostly ‘good' ratings, but one or two aspects rated a lower score such as ‘poor' or ‘satisfactory', it would be worth your while to address those underperforming areas now, before they affect the good parts of the business or area that is working well. As they say, "Prevention is better than cure".
In our example, the sales area may have had the following results:
Sales
Poor
Satisfactory
Needs Work
Good
Sales revenue
 
a
 
 
Sales tools
 
 
a
 
Sales team use of time
a
 
 
 
Lead generation
a
 
 
 
Pipeline follow through
a
 
 
 
Forecasting accuracy
 
a
 
 
New customer acquisition
a
 
 
 
Relationship building
 
 
 
a

From this you can see that new business development / pipeline building is a weakness in the business, but building relationships with existing clients is a strength. Sales tools are satisfactory, but could do with a bit of work to make them even better.
When you review each area of your business, put a score in the ‘summary' box for the number of aspects that are ‘poor' in each area. For example, the sales area of this business has 50% of its key drivers that are basically ineffective! This is a red flag area that requires urgent attention.

Report card summary

Table B

Categories
Poor
Satisfactory
Needs Work
Good
Summary
Sales
4
2
1
1
4/8 (50%)
Finance
 
5
1
3
0/9 (0%)
Marketing & Promotion
2
6
3
2
2/13 (15%)
People
7
4
0
0
7/11 (64%)
Products & Services
0
0
4
3
0 (0%)
Customers
5
5
7
1
5/18 (28%)
Processes/Production
8
3
1
2
8/14 (57%)
Planning & Goal Setting
3
0
1
2
3/6 (50%)

The other numbers above for the remaining areas of the business provide some insights as to what the business owner needs to focus on. The highlighted areas would be a priority. For example, 64% of the drivers behind how they measure the performance and effectiveness of their people, are in the ‘poor' category.
This report card is a direct reflection on business performance over the last year. Would you give the owner of our sample business an ‘A'?
When you've done your own report card you'll be able to see at a glance the overall status and performance of your business, and take the appropriate course of action:
  • No action required (big tick for your performance - or maybe you haven't been completely honest in your evaluation ...)
  • Identify priority areas which require attention
  • Decide what action needs to be taken
  • Implement improvements
  • Review progress in 1, 3, 6 or 12 months time as appropriate
The outcome of this process will tell you: 
  • The strategy required - which will focus you
  • What you then have to do - which will improve your operations
  • What you need to measure in the follow up review - with results as the outcome
  • It will have measured your performance as the driver of the business
  • Finally, if you are underperforming in any areas of your business, it will help you to make changes which result in improved performance

Monitor the vital signs

The most important indicators that you must constantly watch and attend to are:
  • Cashflow and available funds
  • Sales, and plenty in the pipeline
  • Overheads kept low - don't let them creep up
  • Know where you're going (have a plan)
  • Put systems and procedures in place as you go (so you can delegate as the business grows and maximise your return on current resources)

Author Credits

Jenny Stilwell is the Managing Director of BOSSMENTOR®, a consultancy providing advice on strategic growth, structure and people mentoring and development. For further information, please visit the web site: www.bossgroup.com.au

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