Business Performance

Business performance is ultimately measured in money. After all, the purpose of a for-profit enterprise is... making money.

Business success is the result of action. Taking action is the key to success. Doing something is more important than "the perfect plan." 

Think about what to do, and then do it, and then do it again. Call on that customer and make a sale... or whatever action brings money in your door.

Business performance indicators will help you do the things necessary to succeed in your small business. They tend to motivate you to take action.

Choosing Performance Indicators

Business performance indicators let you see how your operations are progressing, compared to the goals you set. So, your primary indicators should be geared to increasing revenue and controlling expenses.

You must control your expenses to be successful in business.

Business performance is often thought of as simply increasing revenues, but there comes a point where controlling expenses can add big bucks to the bottom line. Customers may control your revenues, but you control your expenses.

Profits equal revenues less expenses. For most operations profits are only ten to thirty percent of total revenues. Reduce your expenses and your befure-tax profits go up.

Track performance on a calendar (or fiscal) year basis. I generally recommend that entrepreneurs track only a few one year indicators and even fewer multi-year indicators, such as:.

Yearly indicators

• Operating Expenses
• Revenues
• Production Cost
• Customer Count
• Repeat Orders

Multi-year indicators

• Operating Expenses
• Revenues
• Production Cost

The indicators listed above may not be the most important ones for your enterprise, but you can identify your critical performance areas with a little thought.

Yearly indicators should be updated each month. By the fourth month, you'll begin to see trends.

Tracking the most important indicators will ensure that this tool works for you. Don't spend too much time working the tool. Paralysis by analysis can be fatal to your enterprise.

Indicators showing multi-year performance will become valuable over time, as you add each year-end's performance numbers.

Performance tracking is easily accomplished in a spreadsheet program such as Excel. These handy programs have built-in tools to make the job easier.

Each performance indicator should consist of a data table...

and a chart.

.

The built-in tools I mentioned above includes one that will generate a chart from your data table. Then when you make entries on the table, the chart is automatically updated.

Build simple and clean charts. Your charts should instantly convey their message. On clean charts it's easy to see trends, as well as how you're doing compared to your goals.

Indicators must be updated each month, faithfully. After updating, take a few minutes to review them.

Tracking performance as you go along shows you which area is starting to show weak performance. Give these areas a little more attention early, and achieve your objectives. 

Some business performance indicators don't have directly associated goals, but they help you manage your enterprise. For example, a set of Industrial Safety indicators may include: 

• OSHA Recordable Injuries
• Minor Injuries
• Near Miss Accidents

As I mentioned above, business performance indicators should be tailored to your industry and your company. A nuclear power plant and a gas station would share a few financial performance indicators, but would also track several others specific to their industry.

Safety, radiation protection for workers, and security are tracked by the nuclear power plant, while safety, the number of gallons pumped, and oil changes are tracked at the gas station.

Business goal setting and monthly performance monitoring are valuable tools that will help you manage your enterprise more effectively.

A Google search using the keyword phrase performance indicators will lead you to a variety of additional resources. Be sure to notice the relevant ads down the right side... those are resources also.

Business Mission Statement Page
They don't have to be fancy or complicated to be effective.

Business Performance Program Page
Performance indicators for Large Business... and how to set up and administer the program

Website Performance Measurement Page
Critical performance indicators for  web site businesses

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