How is your business measuring up?
By Nik Askaroff
Despite most businesses in Sussex and the South East having enjoyed a good second quarter, and July and August having been more positive than previous summer months, there is still reason for caution. The recent Bank of England summary of business conditions pointed to ebbing confidence and softer consumer spending.
The UK general growth figures were strong but, as we enter the most important fourth quarter of the year, it is vital that businesses meet budgets and put some money in the bank. Certainly, the soft pound has helped many by boosting exports or bringing money into the country both for leisure and investment.
But what are you doing to either benefit from this demand or protect your business from any fall-off in sales or margin? We all know that proper planning prevents poor performance, but I am continually amazed at how many businesses do not have any plan at all. You should have a detailed plan in place for all of your staff and their departments. Rather than just setting targets for your sales team, you need to creatively help them to build business. This must start by knowing who you want your customers to be and where those companies are.
We recently reviewed three local businesses in the £2m to £15m turnover range. I asked all three for their top 20 target customers. Two looked at me blankly and the third gave me the lists his sales manager had produced that, on research, had two insolvent companies on it.
However, it’s not just the sales team who need a plan. Production, buying, warehouse, accounts should all have targets and benchmarks that recognise how well or poorly they are doing. If you don’t have these, how will your staff improve and how do you measure how good they are?
You should then have visual measures that your staff can see and recognise. Keep it simple and make it understandable. Hours invoiced, parcels despatched, debtor days outstanding, stock turnover, margin generated, back-orders are all simple and effective, and there are many more that can be tailored to every business.
Most importantly, you need to understand the cause as well as the effect, e.g. if I telephone a target customer, I may get an appointment. It is as important to target and measure these activities (‘causes’) as it is to record the ‘effects’. By increasing and carefully thinking about the activity, you will increase the outcomes and, as a result, improve your business. Again, this can be just as easily tailored to a warehouse team as it can to a sales team.
Most employees want positive management and the majority would love to be told how well they are doing. Profit and cash in the bank are, of course, the final result of this, but as your business grows you should be refining how you ‘keep score’ and how you manage and reward your staff.
The Bank of England Report has sent a warning shot to all businesses and talk of a double-dip recession should be scaring us! How good your business is will not only determine whether you survive and prosper, but will also really depend on how good you are.
September 2010