How to Measure the Success of your Business Idea

The definition of success is different for every person. Your ideas of success may work perfectly for you in your personal life but the same logic may not be applicable when it comes to measuring the success of your business. Simply enjoying your work will not ensure a great future for your business. It is necessary to regularly analyze where your business stands currently, where it is headed and what you can do to improve it. This is imperative in building a foundation for what you want to accomplish in future.

The question now is how will you measure the success of your business idea? There are various factors to be looked into depending on what your business idea is and what the current standing of your business is. All owners want their businesses to be successful but are uncertain about how to measure their business ideas or performance. Financial profitability is important for any business but that is not the only indicator of the success, growth or viability of your business.

Listed below are some ways to measure success in a business and which should be applied regularly to ascertain how far your business ideas have taken you.

 

Profit

This is probably the most important factor. You need to keep checking in to see if your business is drawing a profit or are you continuously in the red. If things are not looking too bright then it may be time to consult a financial specialist who can help you get things back on track.

Competition

It may not be a wise thing to compare yourself to others in your personal life but in a business it helps keep you on your toes. Keeping track of your competition and updating your business ideas regularly will ensure you remain higher up on the graph.

Customer Feedback

Nowadays online forums and feedback from customers can keep you informed about the reviews on your brand or business. Checking your reputation with your clients is one of the methods of measuring business performance. Keep a tab on online reviews and comments, make necessary changes to resolve any issues and focus on areas where you can improve on your business ideas.

Satisfaction

Review your business on a regular basis and ask yourself if you are satisfied with the current standing of your company or brand and have achieved the targets you had set. You will probably come up with at least one new idea that could increase your business’ future success.

New Customers

Knowing how many new customers you make is one great way to measure success in a business and predict the growth chart. If your business is barely getting new customers then it may be time to bring in fresh ideas and revamp your marketing strategy.

Social Media Success

Many business owners believe that social media marketing is not relevant for them. They could not be further from the truth. Selecting the right social media platforms to showcase your products or services, and effectively managing the same is one of the best ways of connecting with your customers on a more personal level.

Goals and Planning

One of the most important methods of measuring business performance is having clarity of your end goals. You may have been happy achieving the targets you set for your business initially when you started, but with time are you content with where you stand? The goals may change over a period of time but there should always be something that you keep striving for and accordingly plan for.

The relevant question is not why you need to measure business performance but how to measure it. The factors ascertaining this could vary from business to business, depending on the industry and the individual, but we hope that the above mentioned points will give you headway in measuring the success of your business. In the end you need to be satisfied with your achievements and the completion of the goals you set for your business to encourage all-round success.…

Here are five thoughts on business strategy and execution. These involve setting business direction, knowing where your profits and margins are coming from, understanding your goals, people issues and more.

1. Setting business strategy. In setting business strategy, a first core concept is to decide what your firm wants to win in. For example, a firm can decide it wants to be the best or most dominant in its niche, i.e., niche-centric. For a health system, this may mean, for example, that the system wants to have the best oncology program or orthopedic program or be premier in some other area. Alternatively, a business can decide it wants to profit by offering the very best customer service. A hotel, for example, may decide it will differentiate itself by offering exceptional customer services. Think the Four Seasons. Or in retail, think of a company like ABT.

Another strategy is to be the low-cost provider. Here, for example, a buyer knows if they go online to certain sites they can find the absolutely lowest price. Or in retail, at one time many chains had the concept to be the lowest cost provider.

Another strategy engaged in more and more often is to be so big and offer so many choices that it’s hard for a customer to not use you. In health systems, think of a system that is so large in its area that it is or has been hard for payers or customers to not use them. Here, the phrase “market essential” or “dominant” is often used. In retail, think of Amazon.

Another core discussion on strategy relates to assessing the owners’ or founders’ goals. In a business, one needs to consider whether, for example, they are building a multi-generational business to survive for a long time, building a business to sell, or trying to make a living and cash flow for the foreseeable future. These are not mutually exclusive. In a larger or long-term sustainable type of business, the founder or leadership team has to look at systems and scale issues more fully and assess how they grow a next-level team and keep developing new concepts and markets. In other situations, a business still has to be great, but it can thrive with a smaller team and a different set of plans and objectives and resources.

2. Understand where profits and revenues are coming from. Every business must understand where its profits and revenues come from. This drives many choices and efforts internally and externally. It should force a discipline of constantly rededicating energy and resources to places where profits and revenues come from. It helps avoid what has been called SKU (“stock keeping unit”) creep. I.e., where a business spreads resources to so many products or areas that it is hard to be great and really win and profit in certain areas.

3. Retain and recruit great people. It’s impossible to accomplish very much without a terrific motivated team. Here a business must establish a core team, constantly recruit people, and expect attrition and turnover of, for example, 10 to 20 percent per year. It must also stay rationally lean but not so lean that people can’t grow, pay fairly to rationally overpay, and provide opportunities for people to grow. Not everyone has to be a superstar, but a team needs a mix of solid performers and superstars.

As to people issues, we also try and follow three more concepts. First, don’t evaluate and categorize people too early in their career or job. Second, when you have terrific people that are leaders, don’t be afraid to place big bets on them and substantially promote them. Third, always seek to add in redundancy so as to limit risk if or when a key person departs or loses energy.

4. Pay close attention to business changes. The business world is very fluid. This means businesses have the tough chore of constantly doubling down on core areas of profits and revenues while at the same time constantly looking at where they must pivot and develop new areas of profit and revenues. A business making tremendous margins in an area must look at whether they will continue and what new areas or adjacent areas they should consider. Like digging wells before one is out of water, businesses must look at and test new areas while the business is still thriving.

5. Focus on core competencies and outsource everything else. A business must decide which functional areas it wants to be amazing at and should largely, unless cost prohibitive, outsource everything else. Here a business may decide it has to be great in sales or in customer service or in orthopedics or editorial or in digital media or finance or any number of areas. Then it must make hard core choices to over-invest in those areas and outsource as much as it can outside of those areas. The old business model included having all business functions under the company umbrella. This is a very expensive undertaking and also leads to a huge diffusion in focus. I.e., the more areas one needs to focus on, the harder it is to be truly great in any area. Thus we believe in outsourcing anything you can outsource where you can find the service you need at a rational cost. We also believe that internal complexity in business erodes profit.…

Business planning is your business plan in motion

The Age of the Customer is disrupting and making obsolete many older practices, but not the requirement for business planning, especially cash flow.

A business plan is the result of thinking, researching, strategizing and reaching conclusions about how to pursue opportunities. It may exist only in the head of the planner, but it’s better when written down.

Whether elaborate or simple, a written business plan is an assembly of facts, ideas, assumptions, and projections about the future. Here are three ways to use a written plan:

1.  Document the due diligence on a new business venture or the future of an existing one.

2.  Evaluate opportunities and challenges and compare them with your strengths and weaknesses.

3.  Assist when getting a bank loan and courting investors.

So how does a static, written plan work when a business is always in motion?  It works when you turn your plan into planning. A plan is like a parked car; planning is taking that car on a trip.

Planning is measuring your business motion against the baseline of assumptions and projections you made in your plan. Planning allows you to see how smart you were when the plan was written, or where your research and assumption skills need work. Planning also highlights external forces you face.

Written business plans often become collateral damage during challenging economic times. But you can’t allow planning to meet the same fate. Indeed, when things slow down there is even greater need to check your position than when things are rockin’ and rollin’.

Here is a critical two-step planning activity that’s the heart of a business plan and the essence of planning.  Beginning with these will help you operate more successfully anytime, but especially when business slows down.

1.  Build a 12-month cash flow spreadsheet in a program like Excel, so you can project and track the monthly relationship between cash collections and cash disbursements from all sources. This planning tool will provide a rolling picture of cash flow in any given month.

2.   Look at the “Ending cash” number at the bottom of each month’s column. A negative number in any month means you’ll need to take additional action like increasing sales and/or accounts receivable collection, reduce expenses, or acquire cash from another source, like a bank loan. But before you ask for a loan, if you have time, make sure you’ve pursued all the other options listed, which could either eliminate or reduce the loan amount. And that “if you have time” thing? That’s what planning is for. Otherwise, you’ll be seen as a crisis manager, and crisis managers don’t get a lot of loans.

A banker once told me that if I could bring him only one financial document with a loan request it should be a 12-month cash flow projection that included both how the borrowed cash would be used, and how and when it was going to be repaid.

I always listen to my banker and you should, too.

Write this on a rock … A business plan is important, but planning is essential.