Understanding the NOW and WHERE of your Patrons, Products, Promotion, and People are key parts of developing long-term strategy. Even if you have an understanding of all of those things, though, you’re still missing some key elements. Most significantly, how will you know you’ve been successful?
Measuring success requires you to develop and use key performance indicators. Key performance indicators (KPI’s) are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization. There are thousands of possibilities, but for purposes of this discussion, let’s stick to financial-related KPI’s.
Perhaps the most often mentioned KPI of all is profit. Most business owners like to talk about how profitable their businesses are. It’s used as a measure of success – “A person is born with a liking for profit” (Xun Zi). But how profitable do you want to be? And “As profitable as possible!” isn’t an answer.
Think about your profits NOW. Are you satisfied with them? Are they enough to fund the needs of your business? What about your personal needs? Now think about WHERE you want your profits to be. Go back to the Patrons, Products, Promotion and People work you’ve done. How much profit will you need to fund the WHERE for those areas? A business who decides that a key strategy will be product development requires a much different level of profit than one who decides it needs to function with significantly less staff.
What about some financial info besides profit? “Happiness is a positive cash flow” (Fred Adler). What is your cash situation NOW? Do you have enough cash today? Again, think about all the work you’ve already done with Patrons, Products, Promotion and People. How much cash will you need for the WHERE? Many business owners look at their financial statements and feel good about being profitable, yet at the same time feel like they don’t have any money. It’s important to set profit goals; it’s equally important to think about cash needs. If there’s a gap between your NOW and WHERE, you’ve got work to do.
So what does the profit look like in your business? Are you satisfied? Or wanting more?