It's Monday morning and you're all set for a productive week.
You have clients to take care of, your to-do list is brimming with important items and your calendar is filled with networking events and meetings. Fast-forward to Friday and you're wondering where the week went. You worked hard but you've got a nagging feeling you may not have focused on what's most important to the success of your business.
A broad set of performance measures, or metrics, can help you manage your business for success. Take a deep breath if you're reacting with the thought "that sounds like a lot of extra work". Measuring what happens in your business doesn't mean complex analysis and bureaucratic paperwork! Rather metrics are a simple source of information on how you're doing.
What if you knew the 12 -15 things most critical to your success and could get frequent and timely updates on where you stand?
That's what metrics do.
They give you the data you need to make decisions about where to best focus your time, energy and resources.
Measuring More than Money
You may think that measuring your profits will provide much of the management information you need. The bottom-line isn't the whole story, though.
By the time you've learned how much money you've made, you're looking at history.
There's not much you can do to change last year's or last quarter's financial results.
Not only that, profits don't tell you about the other key dimensions that make your business sustainable:
Don't get me wrong. Understanding profitability is essential. It's just not enough.
You also need to know that you are paying attention to, and working on, the aspects of your business that will yield the results you want. Timely data will help you manage your business.
So what else do you need to know?
Every business, and business owner, has
activities and outcomes related to customers, administration / operations and yourself that drive success.
For your success to be sustainable, you'll also want to consider how well it supports your values, growth and lifestyle. Your metrics should reflect the uniqueness of both you and your business. Here are just a few examples:
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Customers / Market - client retention, referrals, customer satisfaction, clients in your target market
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Operations / Administration - returned phone call turnaround times, ease of finding things, invoices out on time, billable time
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Financial - revenue, billable rate, costs, profits
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Yourself / Life integration - professional development, hours worked, stress levels
Focusing on What Matters
Here's how one of my clients used a very personal metric to improve both his business and his life:
"Brad" had left a well-paying corporate job many years before and not only had struck out on his own, but had made a dramatic career change from software engineer to massage therapist.
Although he no longer made as much money as in his prior career, it was more than enough to support his lifestyle and he was much happier.
Joy was a word he frequently used to compare his life now to his engineer days, which he described as miserable.
However, each time he faced the income dips not unusual for the self-employed, he'd start feeling that "maybe I should just go get a 'real' job."
What became clear was that joy was an extremely important part of what would make his business sustainable.
As long as he felt joyful, he kept his perspective on the ups and downs of business.
So we developed a joy index as one of his metrics.
Brad used a simple 5-point scale and every day he wrote down his level of joy. As soon as he noticed his index slipping below 4 for more than a few days in a row, he'd do something to feel more joy. For Brad, joy was just as important to his success as meeting customer needs and generating revenue.
Getting Started with Metrics
Begin by looking at what truly drives the success of your business.
Brainstorm at least 30 ideas that you can then narrow down to the 12 - 15 that are most important.
Consider factors that encompass all parts of your business including customers, operations / administration and financial. Beyond these more traditional measures, also give some thought to the more personal aspects that will influence your success, as Brad did in the example above.
Make your metrics specific, measurable and meaningful to you.
Once you've identified the 12-15 most important success factors, decide how you will actually measure them. Then set a target.
For example, let's say you've chosen new clients as a critical success driver.
How you measure will depend on your specific circumstances. Do you want certain types of customers? Should they come from a particular source? Do you need clients or projects of a certain size to be viable? See just a few of the many ways you could measure new clients:
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Number of new clients
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Number of new client projects greater than $XX
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Number of new clients from ABC networking group
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Number of new clients in the banking industry
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Number of new clients with potential to provide multiple projects
Learning from Experience
As you choose your measures, don't worry about making them perfect.
You'll be better off using a good list than waiting until you think you have a great one! Unlike in the corporate world where goals are often used to assess success and failure, your measures are designed to give you information to manage for success.
You will learn as much from picking the "right" ones as from the "wrong ones" and you'll know pretty quickly if you've chosen a measure that doesn't work.
Shortly after we started our business, my partner and I were setting our measures for the upcoming year.
At the time, our primary focus was marketing and strategic planning projects for large corporate clients.
As we talked about the major factors that would drive our business, we decided we should have a target for proposals.
After all, if we were to grow our business, we'd need to write proposals so we could continue to get projects.
Our measure became "number of proposals written" and we set a target of 2 per month.
Have you ever heard the expression "what you measure, you will manage"?
We were the living, breathing example of that.
We couldn't grab an opening to write a proposal fast enough and were happily outperforming our target.
For the first month we were feeling really good.
But it didn't take us long to realize that we had the wrong measure - and the wrong priority. We weren't in the business of writing proposals nor was it our strength.
Very quickly, it became clear that we would be much more successful if we spent less time writing proposals and more time doing billable work.
Our sales strategy changed and our measure became "number of projects obtained without a proposal."
I'm convinced that it would have taken us far longer to change our strategy had we not chosen to measure the "wrong" thing.
Making it Work for You
As you look at your business, focus on what will work
for you.
It's critical to maintain a balance across the various parts of your business and among the other important areas of your life.
Align your activities with your success drivers.
Use them to guide you in when you say "yes" and "no".
Choosing, and using, measures that will let you know your business is on track can help you create the success you deserve.
Fast-forward again to Friday.
This time you can feel confident that you spent your time focused on what's most important to the success of your business. Have a great weekend and a great life!
