2020 has been a year like no other, throwing up challenges (and opportunities) for businesses of all shapes and sizes.
But it’s left many owners and entrepreneurs wondering what lies in store for 2021. We’re all adapting to a new way of doing business as the world changes around us, so how do we know if we’re on the right track?
Instead of barrelling ahead into a new — and hopefully better — year, I want to encourage you to take a beat and think about what success will look like for your business over the next 12 months.
And in this short post, I’m going to help you pinpoint the numbers you need to track in order to measure and drive that success.
Measure It, Then Do It
One of my all-time favourite sayings is “what gets measured, gets done”. But before you start pulling any old number into a spreadsheet and obsessing over every little detail, you need to think about why that number matters.
There has to be a big picture impact to tracking a number, otherwise, you’re wasting time and resources to simply stand still.
Which numbers should you track?
Figures and metrics will vary from one business to the next, and from one industry to another, but some will be consistent across the board. For example, do you know your monthly breakeven sales figure? Or what your gross profit should be if you’re aiming to cover fixed costs?
Yet, when you drill down into what you want to achieve with your business, more bespoke figures start to emerge:
- If you want to improve your cash flow, you should track your debtor days. On average, how many days does it take for a customer to pay you?
- If you want to measure the success of your marketing strategy, you should track your marketing spend as a percentage of the sales you make. What percentage of every £1 in sales you make should you be spending on marketing?
- If you want to identify payroll savings to bring overheads down, you should track your staff costs as a percentage of revenue. You can then benchmark this against your sector.
This is just the tip of the iceberg, but the idea is to tie your business goals to the numbers that will help you achieve them.
How do you measure these numbers?
Once you’ve arrived at the mission-critical numbers for your business, you need to understand how to measure them effectively.
Having real-time cloud-based data at your fingertips is a must, as is the ability to quickly capture, filter and categorise information.
It’s also important to present this info in a way that’s quick and easy to digest, while also being detailed enough to be actionable. Business owners are notoriously time-poor, so a 25-page report isn’t getting read any time soon, even if you’re the one compiling it for yourself.
Keep it short and to the point, and use charts or graphs to illustrate and benchmark performance for the month or quarter.
The Next Step? Big, Achievable, Aspirational Targets
Now that you’ve ID’d those critical numbers and you’ve started reporting them accurately each month or quarter, the next step is to develop targets.
These should be achievable, but also aspirational. Too easy, and your business won’t be pushed far enough; too hard, and it becomes demoralising.
So, how do you pick a target? I recommend benchmarking against the sector you’re in; that way you have the context for what’s normal and achievable, and also the impetus to improve upon it.
Having targets is vital to the success of your business, and a good target starts with the right number. Once you know what you should be tracking in order to achieve your goals, you can drive your business forward with confidence.
And remember: what gets measured, gets done.
Need some help planning for the new year? Identifying and tracking metrics? Cloud accounting or KPI-setting? We can help! Book your 15-minute discovery session with Spark today.