Do you have a new product? Is your business running well? Are you ready for the next business year?
Well, it’s time to review your business performance and see how well you have done over the past months!
A successful business owner does not let things continue to run as they are. They constantly compare their progress with the original business forecast to decide successfully where to take their business next. They always conduct performance is a vital part of monitoring the growth and progress of any business.
So, plan again! Proweaver is here to help you review and measure business performance. Let’s help you make the most of the market position you are in now.
To measure your business performance, you need to assess how well your business is performing and track relevant business performance indicators. You should also highlight your strengths and weaknesses and develop actions to implement for improvement.
We will guide you through this essential process to help you successfully assess how well your business is performing.
But first, we should address why we need to review the progress of your business.
The Importance of Business Performance Review
It’s easy to concentrate only on your day-to-day business operations. As you take on more staff, create departments, and appoint managers or directors can make you forget about the performance of your systems and processes, employees, and sales and marketing. As the year winds down, you need to raise awareness of last year’s performance and think about longer-term and more strategic planning.
Knowing where you did well and where you struggled is crucial, especially during uncertain economic and business climates and global and local situations in flux. Conducting year-end reviews can help you determine the best practices you need to perform the next year to achieve your goals.
Here are some of the benefits of reviewing your business performance.
- Gives you certainty about how well your business is performing
- Helps you get the most out of your business or market opportunities
- Allows you to know if your business plan is out of date
- Tells you if your business is moving in a different direction than the one you had planned
- Tells you if your business is unresponsive to market demands
- Helps you to understand if your company is ready to move on to another level
Which KPIs Should You Measure?
Key Performance Indicators or KPIs provide insight into your business performance and help you measure your business success at reaching targets or against the goals you’ve identified. They help illustrate how effectively a business is achieving its goals.
Determining the KPIs you need to measure varies between businesses. You can choose KPIs that mean something to your business, including non-financial indicators as well as financial ones to achieve your goals.
You can consider these tips below:
- Your business direction
See where you are now, where you want to go over the next few years, and how you intend to get there.
- Your customers
See how many you have, how often they buy your products or use your services and see how many customers you have lost or gained.
- Customer Service
This is for waiting times, reviews, complaints, or other reasons.
- Market Share
Check if your market is increasing or decreasing against competitors. Look at other markets you should compete in and see how these markets will change in the future.
- Your Employees
Check your employer’s satisfaction levels, work quality, or attendance records.
- Business Environment
Check out all internal or external factors that may affect your business’s ability to have a competitive advantage.
How Do You Determine the Right KPIs?
Reviewing business performance is about finding the right KPIs and putting them to good use to establish whether your business is performing satisfactorily or whether you need new adjustments.
Here are some tips to help you determine the right KPIs:
- Have a clear one-page strategy as a starting point for identifying your KPIs
- Formulates the questions you need to answer
- Outline your data requirements to see what metrics or data you need so you can answer the questions you formulated
- Find the right measurement methodology by experimenting
- Assign ownership of the KPIs for interpreting their meaning and monitoring their changes
- Share your KPIs with your employees, investors, and other business partners
- Review the KPIs regularly to know if they are applicable to making better business decisions
Once you’ve set your KPIs, you can designate appropriate goals and develop strategies, and eventually have a documented history of your business performance.
How to Review Your Business Performance
Tracking business performance and key performance indicators can help you optimize your operations. Having a process to regularly monitor and measure business performance can help you create strategies to foster business growth continuously and enhance decision-making.
How do you measure your business’s performance? Here are some tips on how to evaluate business performance. See how each intricacy of your unique business fits into the bigger picture.
Assessing Your Business Structure Efficiency
Why do you need to review the current business structure? Assessing your business structure can help you understand if the current one can support your business growth. This will also inform you if there are any internal or external factors holding the business back.
If the business growth is in line with forecasts set out in the strategic plan, is the current business structure flexible enough to support that growth?
Consider these various aspects of your business when evaluating the business structure:
- Do you have long-term commitments to the business property?
- What are the pros and cons of your current location?
- Do you have the capability of expanding or the flexibility to cut back if necessary?
- What would the impact be if you had to move to other premises?
- From a manufacturing point of view, how modern is your equipment? Can it handle a capacity increase?
- Do you have a plan in place to cater to existing and forecasted demand?
- How will you fund any improvements?
- What IT systems do you have?
- Is the current IT system capable of the flexible demands it may encounter?
- Is the current system up-to-date?
- Can all your employees access the business information they require wherever they are?
- Do you have options for more flexible working?
People and Skills
- Do you have enough people to achieve your objectives and fulfill the demands within the forecast?
- Do employees have the correct skills expected of them?
- Do you suffer from high staff turnover?
- Is your HR up-to-date to adapt to demands?
- Do you have the right people in place for growth?
- Do you have the right skills available?
- Do your staff need new skills?
Reviewing your Financial Position
You can be making a million dollars in revenue, but your business can still fail because of poor financial management or a lack of planning.
Here are some of the financial planning elements that you need to review:
- Cash flow
This represents all the cash flowing in and out of your business. You should make sure your cash flow records are maintained and not put them on a shelf to gather dust.
- Working capital
Monitor the amount of inventory you have and see if you need to have additional capital. Make sure you do not have too much inventory or too little.
- Income statement
This measures the profitability of your business during a certain time period.
- Balance sheet
This shows your business’s financial health, and how much you owe and own.
- Loans or credit
Make sure you have the most appropriate level of credit or loans. Seek advice from a business accountant for cheaper forms of finance you could use.
- Cost base
Keep your costs under control.
Adapt your financing to accommodate your business’ growth.
Here are some questions you should also consider:
- Did you meet your financial targets?
- How does your yearly performance affect your plans?
- Do you have to redesign your goals based on last year’s financial performance?
If you want to achieve your business’ success, you should always implement sound financial and management systems. Have a strong financial standing to achieve your most important goals.
- Cash flow
Conducting a Competitor Analysis
Keep an eye on your competitors! Now that you have established your business for a while, you will probably have a clearer idea of your competitors’ reputations and how customers engage with them. Understanding your competitors permits you to make smart decisions about your business.
Here are some of the questions you need to ask about your competitors:
- Who are your main competitors
- Their offerings
- The price of their products
- The profile and numbers of their customers compared to yours
- The strategies they use to obtain a great market percentage
- Their competitive advantages and disadvantages
- Their reaction to your entry into the market
- Their sales distribution channels and how are they different from yours
You can also use a SWOT analysis. This includes determining strengths, weaknesses, opportunities, and threats between your business and your competitors.
You can also use social media to understand more about your competitors;
- What they say about themselves
You can check their blogs, social media posts, advertisements, press releases, shared suppliers, exhibitions, websites, competitor visits, and more.
- What other people say about them
Check what customers, local directories, the Internet, newspapers, analysts’ reports, and market research companies say about them.
- Commissioned market research
For more detailed information, you can conduct specific market research.
You can also use benchmarking to compare your products, performance, and services to businesses in the same sector. It’s important to note that your end goals and market position will affect those comparisons.
Obviously, money is among the most important components of running a business. Do you know if you have increased your profits? You need to know how much money it is generating to know if it is succeeding.
Here are some key metrics to measure your profitability:
- Operating Margin – Check overhead costs
- Gross Profit Margin – Check how much you earned after costs of sales have been accounted for
- Net Profit Margin – Check all overhead costs including tax and interest
- Return on Capital – See how the money you have invested performed compared to other investments
Measuring Customer Loyalty and Retention
Another practical way to evaluate your business’s performance is to assess your customer loyalty and retention. Do most of your customers come back?
If your customers aren’t coming back, it only indicates that your business is failing or you have not fulfilled their needs.
Make sure that you understand what your customers need to retain or attract more. Identify where you need to improve between your products or services to give your business the flexibility it needs to get ahead of the competition at short notice.
You can collect your customers for feedback on your business’ performance through:
- Sales data
- Complaint forms
- Social media
Record this data and use this information to identify what is working well and what areas you need to improve.
Measuring Employee Performance
You don’t want to forget about your employees! Your business wouldn’t survive without them. So, make sure to ask your employees and measure how happy they are at your company.
You can evaluate the performance of your employees through:
- Sales per employee
- Contribution per employee
- Profit per employee
Again, utilize this data to determine what is working well and what areas need improving.
Conducting Marketing Analysis
Conducting marketing analysis helps you to have defined information about the market you belong to. When you’re reviewing your business’ performance, ensure to assess your customer base and where you are in the market.
Look at these factors when revisiting your markets:
- Shifts in your market
- New and emerging services
- Changes in your customers’ needs
- Changes in competitive activity
- External factors such as the economy and new technology
Measuring Tactical Performance
Reviewing your tactical performance can help you determine which actions work best to achieve your success. It will also help identify which strategies failed in achieving your strategic goals.
Here are some of the questions you need to ask:
- Have you identified achievable goals?
- Have you done what you wanted to do
- How did you measure expectations and results and execute them?
- Do your employees know whether they impacted company targets?
- In terms of sales, have you performed as expected?
- Do you have new ideas developing on target?
- Are you retaining staff or is staff turnover too high?
The answers to these questions can help you refocus and redesign the actions you need to start taking moving forward for success.
Tracking New Customers
Aside from measuring your customer satisfaction, tracking new customers can also help you measure your company’s performance. See if the people buying from your business are existing or new customers.
Implement a new marketing strategy for your new customers. You can do this by developing an email list. You should also count how many customers you get from each new business action.
Document how many new customers you gain each month to see how much your business is growing.
Stay Current On The Market
Make sure to stay updated on how the market is doing to measure the success of your own business. This will help you determine if the reasons for your business failures are from your own actions or the result of the national market and out of your control. If you and your competitors aren’t doing well because of the economic decline, make use of this good time to create strategies and develop new products.
Business is unpredictable. Everything continuously changes due to different factors. And success in business isn’t usually down to luck. That is why it is vital to constantly measure your business performance if you want to stay on the success radar. Designing strategic decisions and understanding your own business performance are some of the keys to continue reaping profits.
Do not worry! It doesn’t need to be a complicated process.
Proweaver strives to help business owners identify and set targets for their businesses to achieve. We help them prioritize objectives concerning their business, their employees, and their family.
If you are ready to talk about your goals for the future and get more information on how you can achieve those goals, our team would be happy to help you learn how to measure business performance. Please feel free to contact us at your convenience. You can call us at +1 (877) 216-0852, +1 (877) 300-6564, or +1 (866) 777-8315.
We can help you conduct a regular business performance review to guide you in the direction that you want to go.
Do you need more information about reviewing business performance? Feel free to send us a message. We’d love to hear from you.