Measuring your business’ performance
If you don’t have key performance measures in place, how can you be sure that you’re on track to meet your goals? While financial reports give a strong indication of the health of your business, they are not the only measure that matters.
When running a business you set out with a number of goals in mind that collectively contribute to your level of profit or return on investment. These include things like the efficiency of your processes, the perceived value of the business to your customers and the professionalism, education and skills of your employees. It’s easy to focus solely on the financial performance of your business, but the reality is that if you let any of these other elements fall of your radar you will inevitably be hurting your bottom line.
To keep every element of your fitness business on track you need to establish key performance indicators or measures of success for each area of your business. These could be objectives such as reducing staff turnover by 10% or increasing membership retention rates. The NSW Government provides resources and advice to small businesses via their SmallBizConnect website. On this website they explain that in order for an objective to be useful it needs to be SMART – specific, measurable, achievable, realistic and time specific. So, for example, there’s no point in establishing an objective that all your members work to their full capacity when in your group classes, as there isn’t a definitive way to measure this.
SmallBizConnect recommends using a Balanced Scorecard. Developed by Robert Kaplan and David Norton it goes beyond standard financial measures to include the customer perspective, the internal processes perspective and the learning and growth perspective. The SmallBizConnect website explains these perspectives in the following way:
- Financial: this focuses on the financial health of the business such as the ability to collect accounts receivables when they fall due and pay debtors on time.
- Customers: defines goals related to the value of the business to its customers such as customer satisfaction and market share.
- Internal processes: this focuses on the key business activities that add value to the business and its products. Examples include increasing the number of new products the business sells and improving production process quality.
- Learning and growth: this defines the goals for the intangible assets of the organisation that complement internal business processes, for example, maintaining employee skills.
Plotted on a simple table, for each perspective business owners must establish an objective, measures, targets and strategies to achieve this target.
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Objectives |
Measures |
Targets |
Initiatives |
Financial |
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Customer |
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Process |
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Learning |
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As well as keeping you accountable to your goals, the Balanced Scorecard provides a clear summary of your long-term business strategy that can easily be shared with the rest of your employees.
To learn more about the Balance Scorecard and make sue of other business tools, visit SmallBizConnect.
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