It can be difficult to accurately measure a business’s success, especially during times of economic uncertainty.
However, with the right tools, expertise and industry knowledge, business owners can gain a greater understanding of where they stand and take the steps necessary to strengthen their business. Here’s how businesses measure success.
Ways to measure success
Success won’t look the same for everyone, and needs to be measured differently depending on each business’s circumstances. For example, if you run a tech start-up, you’ll need to look for different performance indicators than someone who owns an established retail business.
That said, there are many tools and methods that businesses of all shapes and sizes find useful for assessing performance.
Review your financial statements
If you want to understand where your business is succeeding and where it’s falling short, taking a good look at your financial statements is the perfect place to start.
Your Income statement (or profit and loss account) will measure your business’s profitability by recording its profits and losses over a period of time. Your balance sheet shows your business financial health showing how much you own and owe and your cashflow statement will summarise the movement of cash that flows in and out of your business and your working capital within the business.
Maintaining good bookkeeping and accounting practices makes it much easier to monitor this information – but it can be time-consuming. A business accountant can help you to maintain accurate accounting records and review and monitor the business financial performance.
Benchmark against competitors
Benchmarking against similar businesses will give you a better understanding of where you stand. If your competitors are performing better in certain areas, you’ll be able to take steps to improve in the future.
Looking at other businesses in your industry may also give you a deeper insight into the market, enabling you to adjust your business strategy if need be and keep up to date with changes in the marketplace.
Listen to clients and employees
How clients and employees respond to your business can be a good indicator of its longevity. Keeping track of new customers and their source is useful for measuring success and predicting growth, while asking clients for feedback may help you improve your services.
Meanwhile, if your employees are productive and you have a low staff turnover, you’ll notice your day-to-day operations running more smoothly and save on recruitment costs.
Measurement methods
Using different methods to organise your data can make it easier to measure your business’s performance.
SWOT analysis
Strengths, weaknesses, opportunities and threats (SWOT) analysis assesses your organisation’s current position in the market and helps predict its future success.
It can be a useful technique for businesses that want to introduce fresh perspectives or reassess their strategy, and must involve analysing the following elements:
- strengths – where is your business excelling?
- weaknesses – where are you falling short?
- opportunities – how can you improve your business?
- threats – which factors could pose a danger to your business?
Key Performance Indicators
Key Performance Indicators, or KPIs, can be useful in determining a business’s performance. Your KPIs are the most important factors influencing your business’s success, and closely monitoring them can give you an accurate health check whenever you need.
While there is no upper limit to the number of KPIs you can monitor, it’s best to keep them at a manageable figure. Most businesses will have between 5 and 10 KPIs and these are not restricted to financial performance.
Working with Thomson Cooper can help you to identify the key areas you need to measure. We can also set you up with cloud accounting software that collates all the necessary financial data in one place, making it much easier to track your business’s performance in real time.
Get in touch today to find out what success looks like for your business and how to achieve it.