Setting targets to drive your business forward
Targets often get a bad reputation.
We’ve all heard stories about the huge numbers of targets set by the government, particularly in health and education, resulting in those working in the affected areas desperately trying to meet targets, rather than doing the job they need to do.
But, if applied properly, targets can have several benefits:
- They act as a motivational tool and, assuming they are achievable (there is nothing more de-motivating than an unachievable target), they can potentially drive everyone on to better results.
- They can be used as the basis for profit-sharing bonuses e.g. a percentage of all profits over a certain amount could be shared between staff. This can even be done on a departmental basis.
- The act of setting targets can be part of an annual strategic planning exercise, and should force management to consider what situations may arise in the year and how they can plan accordingly with staffing levels, capital purchases, cash flow and marketing tactics.
Start by defining your Key Performance Indicators (KPIs)
What are KPIs?
A Key Performance Indicator (KPI) is a measure that assists businesses in tracking how successful they are at achieving their pre-determined business objectives. Knowing how your business is performing can help you find the weak spots in your business where change is needed.
An example of a KPI might be the average profit margin you make on goods you sell. But, KPIs aren’t just financial. It could be an analysis of all the new customers that you get. How many new leads did you get this month? Where did they come from?
KPI’s must be developed and implemented across the whole spectrum of your business. This can include but is not limited to:
- Sales KPIs
- Marketing KPIs
- Finance KPIs
- HR KPIs
- Client Care KPIs
Once you and your team have identified the KPIs that are relevant to your business, then you need to establish the disciplined process of monitoring. The indicators themselves are worthless without rigorous scrutiny. We recommend establishing a monitoring timeline for each KPI. These can be:
- Real time
- Or year on year
How are you going to get this information?
Real time, how!?
After defining your KPIs and how often you’ll be measuring them, you’re going to want to think about the tools you need to get the information easily. Use technology to your advantage! With a good cloud accounting platform, you can track and measure the key areas of business performance in real time, any time of the day. We use Xero to pull up those important numbers in an instant when we need to measure how well we’re doing against our targets.
I have no idea about which cloud accounting package I need?
Do you need a guide to reach the goals?
We recommend our clients spend at least two hours per month analysing the results of the business and asking questions. Most decent accounts packages produce figures that not only show the results for the month but have facility to compare them to the same period the previous year or to a pre-set target (or budget).
Such a review should be designed to “turn over stones” and find out the problems that are really occurring in your business. The small decisions resulting from such an approach will in time add up to big improvements in the results of your business.
If you don't achieve the overall results that you had hoped for it is important to see where you have failed and sometimes to see it in microscopic detail. Did you set unrealistic goals? Are you tracking the wrong things? What strategy did you put in place to improve month on month?
This is why we have our Virtual Finance Director service. Together we will:
- Look at your figures to see what strengths and weaknesses your business has
- Determine and analyse your KPIs
- Save you time and money!
Pop your name in the box below to register for a free chat about how we can set targets that actually achieve your goals.