How to Measure Success
Whatever the size of your business, ensuring that it's successful or not is important to calculate the feasibility of its future, or just to give an insight into how effective it is. For example, some of your processes may need to be changed to make the business more profitable. Success can be measured in a number of different ways, and it's important to remember that what success means for one business, might not be the same for any other business.
Success is often measured based on a number of realistic targets. These are often known as KPIs (key performance indicators). They are unique for each business because every business is different and will measure success in different ways. Weve highlighted some different targets to show how different businesses can measure success in different ways.
- A small high street store may use its daily takings as a target and measurement of success. This could be through aiming to take £2,000 per week. This could be its breakeven point, or a comfortable profit margin.
- A medium-sized business with 5 outlets may set sales targets for each outlet. If this was a chain of coffee shops for example, they may aim to sell x cups of coffee per week, per outlet.
- A large retail outlet with over 500 stores nationwide would have much bigger targets, and chances are they will have multiple targets too. They could set targets for the number of items sold and the money taken daily.
But because these are targets and you know what you're working towards, that doesn't necessarily define success. For example, a shop could be taking £2,000 weekly to break even - but does breaking even mean the business is successful? Each figure has to be looked at in context. For a business in its first year, breaking even could mean it is successful. But for a business in year 5, this may not be as successful - unless it's been making a loss until that point.
Many people understand that targets are a good way to monitor your success because they're measurable. But setting targets can be tricky. There are a few things for you to consider when setting targets:
- Are there seasonal influences for your sales? For example, a toy shop will see an increase in sales around Christmas. Whereas a shop selling beach accessories will see an increase in sales in the lead up to summer and during any warm weather.
- Are there any upcoming legislation changes? A change in tax laws for example, could see a boost for accountants or tax advisors. A change in Health & Safety laws could see an increase in sales for new equipment.
- Are you launching a new product? If you've marketed it well, you could see sales increase.
- What were your sales / turnover like this time last year? If you can see any pattern to why there was an increase or decrease in this, you can look at replicating the circumstances to see if you can get the same effect again.
- Are you hosting an event, or launching a new web site? It could increase awareness of your brand which can lead to an increase in your customer base and your sales.
But remember: each business is different.
Types of Targets
Now weve looked at how targets can be a good measure of success, how can you look at implementing them for your business? How do you know where to start and what targets you should use?
- Customer numbers: A growing customer base could show that your brand awareness is increasing or that your marketing campaign is working. Alternatively, falling customer numbers could show that there is something wrong with your processes or products.
- Profit / Turnover: If you're a new business, it may take some time before a profit is seen, but an increase in turnover is a sure sign that things are heading in the right direction. It's great to see money coming into the business, but even turnover has to be considered in comparison to your profit. A lack of profit could be due to large start-up costs and hopefully your loss will slowly decrease and profit increase. However, if you are seeing that month on month you are making a loss, even with increased turnover, it may be time to re-think your business improve the way its running. '
- Feedback: If you are using a feedback scheme, ensuring positive feedback is coming, shows your business is on the right track. Being able to maintain the level of service that produces the positive feedback along with growth can be a challenge, but it could help you keep your eye on the ball.
- Market position: Being a big fish in a small pond is often much better than being a small fish in a big pond. This would require keeping a track on your local competition which can be tricky, but seeing your business moving in the right direction while things decrease for your competition could show signs of brand loyalty and that you're doing things right.
Are you a success?
We've merely touched on a few points of success of a business, mainly because every business is different. Take a look at your business, look at it in the context of setting targets, and measure yourself against them. This may require a bit of manual work but it could surely help you ensure your business is heading in the right direction to be successful.