How to determine whether a business is really successful
If there is no money and the company is on the verge of bankruptcy, the conclusion is obvious – the business is unsuccessful, as they say, it did not go. With the notion of success, everything is not so obvious. Information can be so excessive that the head of the company has to grasp his head in order to compare all the data and draw the necessary conclusions.
It is necessary to collect numerous data in such a form, which will give a full vision of the company’s results and its financial state. But a pile of numbers can overwhelm even the most hardy brain.
The process can be optimized by determining “on the shore” which specific indicators of success should be taken as key. This data should be documented.
You can start with five indicators of success. This will be the base. The indicators should
- be focused on high-level indicators – those that will make it possible to evaluate the company’s profitability, its growth in terms of the fulfillment of its mission and core values;
- have measurable quantitative expression (volume, price, productivity, etc.).
But it is better not to take private and specific indicators.
WHAT PERFORMANCE INDICATORS OF THE COMPANY CAN BE USED
- Financial strength. Shows how solvent and sustainable the company is. It is necessary to take into account the actual profit, as well as the share of costs in gross profit, the dynamics of growth of profits and costs.
- The degree of customer satisfaction. You can assess by means of surveys. Without satisfied and loyal customers, the company will fail.
- The degree of satisfaction of the personnel. It is also defined by means of a poll. Unsatisfied employees are unlikely to make satisfied customers of the company.
- The degree of social responsibility of the company (contribution to the environment, social policy, etc.). It is necessary to determine which natural resources and in what quantity have been saved by the introduction of new technologies (timber, water resources, etc.). The company should be guided by a noble mission and not by greed. Only with this approach can the best people be retained.
- Key operational results (number of goods sold, hotel rooms occupied, etc.).
Other indicators can be entered as well. But preferably – within 10.
HOW TO ACHIEVE KPIS
Stick to three steps.
- Define the company’s mission, values, list of goals and accomplishments that will indicate that the company is sustainable and operating effectively. This will help establish which metrics are considered key.
- Create a sample of key success indicators. They should help focus on priorities rather than individual details.
- Set the company’s ultimate strategic goal for 3-5 years and establish a system of intermediate goals. Criteria should be measurable and show sustained organizational success, otherwise it will be difficult to track how well the goal is realized.
Don’t forget to periodically improve your financial literacy, this will improve the quality of management decisions.