Measuring performance: Are you just guessing?

Maybe you’re familiar with the clichés that you get what you measure; you can't manage what you can't measure and what gets measured gets done.

Perhaps you're already aware of the extent to which big companies are measuring performance by measuring customer satisfaction, staff productivity, product quality and so on.

Have you ever thought about the role of measuring performance in micro business? Or have you dismissed this thought because you're already wearing enough hats as it is?

Consider this: measuring and monitoring your business performance is possibly the most essential hat you should wear in your business.

Think about something you really wish could change in your business, something that matters because it impacts business success. Is it getting more customers? Or finding more time for your dream lifestyle? Or increasing your profit margin? Or reducing the proportion of your time that's non-billable? Or finding new leads?

Whatever it is, how exactly and objectively do you know how much it's actually happening now?

Do you know how many new customers you're getting, on average, from month to month? Do you know how many hours you're giving to your business, typically, each week? Do you know where your profit margin is now, and how that's changed as time has gone by? Do you know what proportion of your time is billable (or directly revenue earning) and how that varies month by month?

Do you know how many new leads you get for each marketing campaign you run and whether your hit rate is improving?

Do you know exactly and objectively how many customers you want from month to month? How many hours you want to give your business, typically, each week? How much you want your profit margin to be? How much of your time should be billable? How many new leads you want to attract, for every dollar you spend on marketing?

Unless you are measuring performance, you can't know these things. You can't know where you are now, and how far that is from where you want to be.

If there's a result in your business you want more or less of, then measuring it regularly over time will give you three kinds of power you can't have otherwise:

1. The power of focus, which will keep your attention on what matters most in your business rather than letting it meander and snap from distraction to time-wasting distraction.

2. The power of feedback, which gives you a balanced and objective reality check on where your business is truly at, so you don't succumb to biased conclusions based on what happened today or last week or what your loudest customer said.

3. The power of a fulcrum, a way to leverage your efforts so you get bigger improvements in your bottom line for the same or less time and money, not frittering it away on sterile investments.

Sharper focus, regular and balancing feedback and a leverage-boosting fulcrum. We all need more of that, especially in small business. That's what measuring performance does for us.

What is the one result in your business that you are, or should, be measuring?

Stacey Barr is a specialist in performance measurement, helping micro and small business owners to move their business results from where they are, to where they want them to be, using powerful, transformational measures.

6 comments | Add your own

Great article Stacey.
As we are primarily an online business an area that has proved effective is measuring the sources customers have used to go to our website leading to a purchase. We use web analytics to do this measurement and it has helped us refine our marketing efforts. Susan Oakes from Sydney
Thanks Stacey. Yes, I implemented a business management system a few months back so I can now track things like online conversion rates and average phone hold time (for customer satisfaction). It's made a world of difference because I now know where to invest my time to have the most impact on results. Joel Montgomery from Sydney, Australia
Spot on, Stacey - An old truism is "you can't manage it if you can't measure it". Grant Hyman from Sydney | Read my articles
Thanks Susan, Joel and Grant for your comments!
Great to hear that you're all measuring some important results in your business. Congratulations! Not many people seem to yet. I was in Los Angeles this past weekend at a workshop for solo entrepreneurs, and I was staggered how many people had no idea they should be tracking their results!
I like what you said, Joel, that now you know where to invest your time to have the most impact on results - BINGO! That's one of the great things that measures do for you. Stacey Barr from Highvale, Australia | Read my articles
Thank you Stacey. Most businesses are not aware that their existing accounting software, when it is set up properly, can assist them with measuring performance.
In my opinion having accounting software for only accounting and tax purposes is waste of money, using it for a greater purpose such as getting answers to all your questions above, is value for money. Judit Nagy from Sydney
Judy, I use MYOB in my business, and I regularly export just a few key sets of data into my business reporting system (I use Microsoft Access) and combine it with my non-financial data. So that means I can track measures that aren't just financial - like the profit I earn per hour I spend in my business. It uses profit from MYOB and my time log which I import from Outlook. It's very powerful to use the accounting data like this, and actually quite quick and easy too! Stacey Barr from Highvale, Australia | Read my articles

6 comments | Add your own

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