Measuring up
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It can be easy to get caught up in the day-to-day running of your business without taking time to step back and take stock of how well your business is actually doing. That's when a business-performance review is invaluable. It'll help you get a fresh perspective and set new objectives. Afsheen Latif reports
"A business-performance review is an essential management tool," says Roger Hetherington, adviser at Business Link Suffolk. "It's important for business owners to know how well their business is doing. The most effective way to start is by referring to your business plan."
Business plans should contain key performance indicators (KPIs) - the goals you have set for all areas of your business, particularly sales, marketing and recruitment. Hetherington recommends comparing your business performance against your KPIs to see if you're on the right track. "Remember, it's not necessarily a bad thing if you've moved away from your original business plan," he comments. "Business owners have to ask themselves if they're happy with the direction that the business is moving in, and refresh their plan accordingly." Break things down To make the task more manageable, it is best to look closely at each area of your business, such as finance, efficiency, staff and market position. "This will help you identify problematic areas causing you to miss overall targets. If they're detected early enough, you can take remedial action," adds Hetherington. Assess your finances by looking at your costs, revenue, cashflow and profitability. If you're meeting sales targets, but your profits are down, you may have a problem with increasing costs, inefficiency or a more serious issue, such as fraud. If you have employees, consider your staff turnover rate. If this is high, this could be interpreted as your business performing badly when it comes to HR management. Poor motivation and morale among staff will be reflected in poor sales and reduced profits. Problems with absenteeism and punctuality can also be signs of poor HR management. Benchmarking Learning more about your competitors can be a valuable exercise, too. "Compare your business against others similar to yours in size, sector, customer and location," says Hetherington. "It's unlikely that you'll be able to access their financial information, but you can check out their products and prices, plus any promotions on offer," he adds. You need to consider whether you are being left behind by more dynamic competitors. Growth Action Plan You can even arrange a quick health check for your business. Business Gateway offers a free Growth Action Plan, a service that provides you with an objective review. Your business is matched with similar businesses, to show you how well you're performing. The Growth Action Plan will also assess whether your business has met targets set out in your initial business plan, providing you with guidance on how to make revisions. Targets and milestones When you have considered how well your business is performing, you need to focus on where you want to take it, and set in place strategies to make it happen. "To make effective progress, set yourself milestones to ensure you achieve new targets in the time you want," Hetherington concludes.
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