In 30 plus years in both sales and marketing and in management, I have often heard, "What gets measured gets done." Tracking performance is behind all of the major quality systems. Whether or not you comply with a quality program, performance measures are vitally important to your small business profits.
Here Are Seven Reasons to Measure Activities in Your Company:
- It gives you history to compare
- Measurements enable you to recognize superior work
- Performance measures inform you of problems in time to fix them
- Tracking results is fun and exciting for your team
- Keeping score provides feedback on how employees are doing
- Achieving goals gives everyone something to celebrate
- Consistently meeting quality standards means happier customers
Measuring Performance Isn't Enough
While the above reasons are important to your small business's profits, there are some potential traps in having measurements.
- Performance measures alone do nothing
- You must take action
- Top management must commit to the action you decide on
- Be sure that what you measure is the right measure
Performance Measures Alone Do Nothing
By themselves your metrics or performance measures are just numbers. If you have no context for what your numbers are saying, they are a waste. However, when you get advice enabling you to read the story behind your numbers, they can guide you to more profitable actions.
- Do more of what is working
- Stop what is costing you money with no results
In 2004 on a small business consulting job in northern U.S., I discovered my client, a brick and mortar business, was spending over $200.000 per year on Internet ads to generate leads for their salespeople. Fortunately for me, they had all of the numbers I needed to finally determine that they could save one third of their costs. Those leads closed less 1% of the time while leads from some sources closed as high as 10% of the time.
You Must Take Action
Once you get the results, you must act. If you monitor your results actively, you can fix a problem before a profit leak becomes a flash flood wiping out your profits. For instance, friends of mine who are Internet marketers recently discovered that despite their high volume of traffic they suddenly weren't getting people to opt into their membership site, and they weren't getting any sales.
Fortunately they found out fairly quickly and got their technical support on the problem. Within a couple days, they got back up. Now customers can join them and make purchases.
Top Management Must Commit to the Action You Decide On
Employees are cynical because they've seen all sorts of world changing plans from 'on high' that just fizzle out. As a small business owner, you and your managers must commit to the action you decide to take or your employees won't either.
Be Sure That What You Measure Is the Right Measure
When I had my small business in El Paso, a friend sold for the largest local computer dealer in the area. I was astonished to discover that they paid her commission on the gross sales. As I suspected, her sales were heavily discounted. Instead of rewarding people on the gross sales figure, pay them on the gross profit if you want to be profitable.
Your small business needs to set performance measures in all production, sales and accounting areas so as to be able to manage your business. However, numbers alone are meaningless until you know what they are telling you. Once you know, take action to correct or improve; get top management's commitment and be sure you are measuring the right things. You will enjoy greater profits from actively managing your numbers.
*Note: This was written by a Yahoo! contributor. Do you have a story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.More from this contributor :
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