Step 9: Monitor your progress to your targets
When you are driving, there are three things you look at on your dashboard, right? Your speed, your fuel level and the engine’s temperature.
It should be the same in your business. What are the three to five most important things, KPIs or Key Performance Indicators, for you to keep an eye on? How do you decide which are the most important, and how do you calculate them?
Use this four step process to create your own dashboard:
First you need to understand which KPIs have the greatest influence on your ability to achieve your goals. For a professional firm, this might be the average hourly rate invoiced (not charged to a timesheet!). For a contracting firm, it might be your gross margin for any job. For a retailer, it could be the average transaction value for the day or the week.
Remember when we were discussing where you are now (warts and all), you worked out the current level of activity that’s generating the sales numbers and returns you’re achieving now. So, you need to know which of your KPIs, when increased or decreased, will have the biggest impact on your future results. Choose no more than five KPIs to measure.
Next, work out how you’ll measure the five KPIs. Make sure the measurement process is automated wherever possible. For example, if you want to measure your gross margin by job, you’ll need to dissect your income and expenses on a job by job basis. Most cashbook systems enable you to do this.
If you want to measure average income per client per annum, you need to measure your revenue on a rolling 12 month basis and divide this by the number of clients you have.
From here, you need to set up a simple one page report that you can produce on a weekly or monthly basis to track your progress against these five KPIs. Make sure you allocate time to go through this report every time it’s produced and share the results with your team.
Repeat these steps with your individual team members. The KPIs for team members will be different to the KPIs for the overall business. Establishing KPIs for each team member lets them understand the definition of a great day’s work for them. Monitoring and reporting the KPIs regularly will help your team know if they’re on track.