Get Ready for a More Profitable 2010

by Mark Wardell

This year, pay attention to the right signals and increase your value

It's early into this new year and many business owners are starting to think about ways to become more profitable in 2010. Sound familiar? Of course, it's goal setting season. And yet missing company targets has become nearly as common as failed New Year's resolutions. So this year, instead of writing about goals, I thought I'd write about how to make sure you actually achieve them.

Key Performance Indicators. There, I said it. Now before your eyes gloss over and you fall to sleep, remember this: performance indicators are nothing more than helpful goal-setting tools. After all, how can you expect to achieve your goals without measuring them? To grow your business with some measure of certainty, you need to set benchmarks across the key areas of your business so you know which areas need attention.

For most people, performance indicators come straight off their financial reports. But to make them really come alive as a management tool, you have to go beyond the numbers. Of course, you should measure your sales figures, expenses, margins, etc. But you also need to look deeper. I first realized this when I was starting my own company. Like most, I began with a document that detailed the important areas of my business and used my financials as my measuring stick.

What I discovered over time was that the numbers showed me how much money I made last month, and were helpful in tracking past growth, but they didn't talk to me about the future. They were useful, but they weren't entirely meaningful. What I needed - and so do you - is information that, in addition to looking backwards at progress, also looks forward at opportunities and challenges. For example, things like why your clients will or will not continue doing business with you.

To make your numbers more meaningful, try to have them answer the following questions:

• Are my products/services creating value for my customers?
• How do my customers perceive and measure that value?
• Is my company creating value for itself?

Customer surveys are a great way to achieve this. At Wardell we use information from a client survey to track the goodwill value of our clients' businesses on a regular basis. So, as long as these numbers continue to climb, we can be fairly confident that our clients will continue to see value in our services. If they don't, our indicators buy us time to resolve the problem, before it becomes critical. That's the power of a forward looking indicator.

As you develop your performance indicators, continuously ask yourself: "Is value being communicated by this number?" and "what does this number indicate about the future?" I guarantee if you take the time to make your indicators meaningful this year, you won't be welling up with tears of boredom next year at this time. Instead, you'll be celebrating your success.

Mark Wardell is President of Wardell Professional Development (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.

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