Is there an easy way to manage your business? No!
There is no easy way but there is an effective way and that is to manage your Critical Success Indicators (CSI’s). These are the standards of performance that you set for the critical areas of your business and you measure against actual results. CSI’s focus your attention on the very important expected results and provide you with early warning signals when corrective action is required.
Cash Flow is the very best Critical Success Indicator for managing the finances of your business. While the Profit & Loss report gives you your profit position, it is Rear View Mirror information; i.e. it tells you what has happened in the past. Cash Flow is very much in the present and provides you with the tool to actually manage the flow of money.
The one business activity that entrepreneurs really understand is sales! To be an effective CSI, sales projections must be broken down by month and must be broken down by product. Then they must be measured against actual results as close as possible to the end of the month so that early corrective action can be taken. And never, never, never assume that a sales shortfall this month will be made up next month. It won’t, so initiate corrective action now!
Your sales are on target, your cash flow is healthy and so all is well with the world. Unfortunately, hidden under the layers of good news there could be problems with your delivery service. So make sure you develop AND measure CSI’s for product delivery. If you want your products delivered within 24 hours of receiving an order then set that as your standard to be achieved.
It is called the 10 Times Rule and it is explosive! For every customer who actually complains there are 10 others who are unhappy with your service but won’t tell you! This tells us that at least one Critical Success Indicator should be zero customer complaints. Even so things still go wrong despite everyone’s best intentions. When this happens act IMMEDIATELY. Don’t let it fester; don’t assume it will go away.
Processes are the engines of your business; they keep the engine running. Identify the Critical Processes. For example, the processes that produce invoices are probably critical. If you don’t produce invoices you won’t get paid. The Critical Success Indicator for the invoicing system could be deadline dates for their production. For example, every invoice will be in the mail by the 3rd of every month.
The strength of an organization is in its people and their ability to work as a team. People problems are not obvious and are only uncovered by measuring the people based Critical Success Indicators. For example, chronic absenteeism is a sure fire indicator that something is seriously wrong. As is high staff turnover. Find out what the standards are for your industry and start measuring results.
Your business success does not happen by magic! It is the result of your skills, your hard work, strategic planning and effective management. Decide what your Critical Success Indicators are, set the standards and start measuring the results. You will be in charge of your business; you will be managing your business growth.
Here is a tool to help you measure the health of your business. Click here!