Open up the newspaper, and you’ll read tragic stories of long-established companies who have had to close their doors after 15, 20 and even 40+ years in business. Listen to the news, and all reporters seem to be talking about these days is the damage and destruction to companies of all sizes, from this turbulent economic storm. Even if you manage to avoid the news and the media, you can’t avoid the brutal truth that conducting business as usual is not going to navigate your company in this unusual economic climate.
There are two types of responses to this recession. One is to panic, which fills your mind with fear, doubt, worry, anxiety and bitterness. The second is to get better. If you are serious about surviving and thriving past this recession, you need to get serious about getting better in all aspects of your business. In my six-part article series on “Boosting Your Business Profits,” I will cover six major aspects of your business in which you can improve your technique, skill, strategy and results.
But, first things first — before you can apply my toolbox of tactics, you need to start by knowing where exactly your business is strong and precisely where it needs reinforcement. Whether your goal is to increase your total net profits by $10,000 or by $10 Million, you need to isolate individual values that collectively contribute to that goal. Remember that performance measured is performance gained.
Here are seven places to measure your performance:
#1. Measure your time. All of us in leadership ask at the end of the year, “Where did all the money go?’’ I encourage my clients to start a habit of asking at the end of each day, “Where did all my time go?’’ We all know the old adage, “Time is money.” Time is the first place I ask clients to measure and evaluate. I often help clients design what their personal daily report (PDR) forms should look like based on each person’s specific duties and function. On the PDR form, or even on just a notepad, each employee logs what she accomplished and how long it took them to complete each task. Once you accumulate a two to three week snapshot from everyone, you can then begin to identify not only each person’s efficiency and productivity, but also their effectiveness. While efficiency is important, it is possible to be efficient at all the wrong things. Productivity is especially important to determine for key people like the president and senior managers. Remember that performance measured is performance gained.
#2. Measure your marketing results. Does your company log in every prospective call, how they heard about your company, what product or service they were interested in, and their contact info? While this may sound like basic business practice, it is one that is not widely practiced by even the established companies. The person who makes the advertising choices and approves the marketing plans needs to have an accurate monthly advertising/marketing source report from which to base an effective strategy. Marketing mistakes bleed resources, and the biggest mistake decisions are made arbitrarily. Remember that performance measured is performance gained.
#3. Measure your conversion efficiency. For most industries a sale does not happen right after the first inquiry call. There is an intermediary phase that has to occur. For the caterers, they need to convert inquiry calls to appointments to sample their food. The health club industry needs to convert the first call into a compelling reason to come visit now. Service industries, whose calls are mainly from price collectors, can still create a compelling incentive to get prospective customers to sample their companies, whether it is in the form of a valuable newsletter or an educational video. The sample stage is an important phase in your sales cycle. Don’t simply react to the year-end profit number without having examined how your company has performed at each phase.
Remember: Performance measured is performance gained.
#4. Measure your closing ratio and average order. Closing ratio should be measured in relation to the number of people who came in the door to sample your product or service or in relation to the number of estimates you delivered to prospective customers. Both numbers are vital in making your forecast calculations. Most companies have more than one person who impacts the closing ratio. I often work with clients to create a system that will best separate and measure individual closing ratios. Even if your company has a team culture, you still need to know exactly how each member is contributing to the team’s overall results. Your company’s average closing ratio could be 20 percent, or it could be 80 percent. If the closing ratio and/or the average order is too low, a good solution would be to invest in sales training. But, you can’t evaluate the true ROI on the sales training program you select if you don’t know exactly what you started out with. Remember that performance measured is performance gained.
#5. Measure your product or service offerings in margins. What I see a lot of small company owners do is look at their revenues in one lump as the annual total. But, what you should do is run separate P & L’s (profit and loss statements) for each of your offerings. If your company sells four main services, you should know how they rank in terms of margins, not just in terms of the total sales volume they equaled together. You can’t keep an eye on the bottom line (net profits) if you are too focused on the top line (sales revenues). Remember that performance measured is performance gained.
#6. Measure your weekly P&L. In a normal economy, I would recommend doing this on a monthly basis, but in a recession it is important that you know the financial snapshot of your company on a weekly basis, particularly if cash flow is already uncomfortably tight. That means you need to have a reliable bookkeeper that can stay on top of invoicing, bills and reports. Your bookkeeper also needs to be readily accessible, so you can get your information in a timely manner. Remember that performance measured is performance gained.
#7. Measure your staff productivity. The starting place for this was in step 1 where your staff filled out their PDR forms. Now, what will you do with that information? Do you know how long it should take for larger projects or tasks to get accomplished? You could have someone on your payroll at $20 an hour who takes 20 hours to complete a task or you could have someone else who is $40 an hour who can deliver the project in two hours. By measuring staff productivity you will find that cheaper doesn’t always mean cost effective.
Remember, you made a decision to get better and not grow bitter. But, keep in mind that getting better is a process. Don’t expect overnight results. People’s reactions are always based on their expectations. So, don’t set yourself up for frustration or failure with the wrong expectations. Taking measurements is a process that takes time to collect accurate calculations and reports. Once you have gathered all this important data, your efforts at leveraging your strengths and reinforcing your weak spots will be all the more effective. So, remember: performance measured is performance gained.