How do I monitor my Business’ Health? (Daily, Weekly, Monthly and so on)

• Continuing with analogy themes, monitoring your business’ health is like giving yourself a daily check-up – How is your pulse rate, your temperature and other key symptoms – In business these are commonly referred to as Key Performance indicators (or KPI’s).
• As business owner/leader, you and your management team will have a good idea of what indicators these should be and what the benchmarks to check these against are. Often these are based on historical experience/performance, but they should be balanced with your future improvement expectations, which could be based on current economic and market conditions and budgets/targets that you have set yourself.
• You should also simplify these as much as possible to fit on a small dashboard (like in your car which gives you key info – speed, fuel, issues etc), so that gathering the info is quick and easy, and also to ensure that you focus on Key business drivers only. The frequency that the information is required will also determine the level of detail you should expect. More frequent = less detail (high level summary), less frequent = more detail. Almost like symptoms (immediately available) vs underlying cause (takes further investigation)

What should my business’ KPI’s be?

• This depends on your business and needs to be tailored appropriately. Product businesses will focus on different metrics to services businesses. Similarly, Retail will be different to manufacturing. These may also vary based on the audience they are shared with
• Keeping it Simple (KISS approach) 3 key segments (plus other) should be focused on:
  • Profit – how do you measure this? GP%, NI %, expenses %, Discount %, stock loss%, Out of stock % etc. Also, GP per customer and GP per product/service! If you are not making a positive GP per sales transaction, then you are not recovering the cost of other expenses in your business.
  • Cash – For all businesses this is by far the most important metric. Without cash and a positive cashflow you will be unable to pay your debts, staff or yourself. Credit/Loans only provide short term solutions. – Daily bank balance, weekly/monthly cashflow projections, stock days on hand and Debtors days on hand are key metrics, plus have a Credit facility for emergencies only!
  • Revenue stream – what are your key revenue drivers? – # leads, # calls, # new customers, Customer retention %, new products/services, conversion rates, average basket size, premium mix %, sell-in vs sell through? The pipeline needs to be constantly filled and forward thinking with plans and actions are vital to sustainability
  •  Other – varies per industry/business – manufacturing will have many related to performance in this area, similarly services may look at customer satisfaction, response times and Retail will look at foot traffic, site visits etc.
  • Whatever you choose – make sure KISS is top of mind. It must be easy to obtain and accurate/reliable and easy for users to understand the indicators result.
    
    Some Tips to consider are:
  • Costing system – How do you measure cost and GP? Make sure this reflects reality and includes all direct costs related to selling your product or service. Watch out for leakage – eg: discounts, stock loss/obsolescence
  • Productivity – This is usually well measured in manufacturing operations, but almost ignored in other areas. How do you measure sales/marketing effort vs reward? Time wasted in back office functions, meetings in general etc? Challenge yourself to assess opportunities here
  • Opportunity Cost – Hardly ever measured but should be evaluated from time to time to keep your business sharp and effective. This means weighing up the cost/benefit of one activity versus another
  • Reassess these constantly. If you or your team are not looking at any indicators, stop using them. It’s wasting preparer’s time and adding no value
  • Remember KPI’s are only the vital signs. A full health check on your business should be done on a regular basis too!

How can we help you? (www.pathfinderssa.co.za)

We provide variety of standard services across all aspects of business as well as programmes tailored to suit your needs, as highlighted below:

• Health check – 1 day face to face full check-up (a high-level fitness test)
• Tune up – 3 days – Starts with a Health check and follows with full strategy and operational plan review
• Overhaul – 5 days – Includes Health check, Tune-up and deep dives into action plans and Key Performance Indicators (KPI’s) to ensure delivery on action plans
• On-going check-ups – usually a quarterly or six monthly check-in to assess progress against agreed upon action plans. However, these can be more frequent if required
• Tailored plans – based on your requirements we can tailor our services to meet most of your needs. If specialist help is required, we will help you find the solution that works best for you

 

Contact us via info@pathfinderssa.co.za or via our website www.pathfinderssa.co.za to find out more.