In this series we are using the analogy of making a chocolate cake. Monitoring is the art of checking the cooking process to avoid any over or under cooking.
(Business Planning – Monitoring is Step 4 of Formulating a Business Plan. If you haven’t already please refer to our recipe for building bigger profits post)
Key Performance Indicators
Establishing Key Performance Indicators (KPI) are vital for business owners or managers to know whether the business is on track to achieve what it has set out to do. These indicators are not any randomly selected measures though. They should tie to the goals you want to achieve, establishing the wrong measures can in fact lead you further away from achieving goals because it establishes organisation behaviours which may actually inhibit the journey to your goals.
It’s quite easy to get carried away with many indicators, unfortunately too many become a distraction. It’s important to have just a few of these (hence the name “Key” performance indicators), pick those that are most relevant to achieving your goals and those that can be measured and reported on the most reliably (see below).
To give an example, in many service based businesses time is money so establishing an indicator around delivering an outcome on schedule is important. For most businesses an indicator around customer satisfaction or engagement is also going to be important. Each industry have a broad set of KPI's .
We discuss KPI's in more detail on this article but we are also happy to discuss these with you further should you need our help.
There is no use going to the extent of establishing strategies, goals and key performance indicators if you aren’t going to check in on how it is all going and making changes to refine your overall approach. This is where reporting becomes vitally important to achieving business outcomes.
We find that often reporting is filled with lots of financial numbers, and naturally this is the starting point for reporting as the greatest indicator of strategy success is financial outcome. However robust reporting will have easily obtainable measurements on the key performance indicators.
It’s really important that they are easily obtainable and that they are relatively objective. Otherwise too much effort is put into getting the information which is a distraction from actually driving the business forward.
By completing the 4 steps mentioned over these series of blogs, you've either developed the basics of a robust business plan, or you have a really good chocolate cake. There are other aspects to a business plan that will be covered in future blogs that will also need to be incorporated into your business plan. Notably:
- Financial Forecast
- Marketing Plan & Analysis
- Operational structure
At Evolve Accounting we specialise in facilitating the creation of business plans and all other aspects that go into business plan such as:
- Business Plan formulation
- Goal Setting
- Cake Making
- Establishing Key Performance Indicators
- Accountability to your goals
- Acting as a virtual chief financial officer to your business (VCFO)