What Is Business Performance?
Business performance is management and analytic processes that allow you to achieve your defined goals as a business owner. So with that said, to improve your business performance, you have an overall business strategy with defined goals developed for your business.
What Affects Business Performance?
How a business performs is usually reflected in its overall financials. A well-performing business will operate well across all areas, have a defined overall business strategy and direction, have documented processes and procedures, and follow best practices. They also will measure and track their performance, whether that is their financials, sales forecasts, return on their marketing efforts, or customer retention. Some businesses make money despite themselves, but this will only happen over a short period, as a poorly operated business will eventually affect their financial performance.
Importance of Strategy
Sometimes when we talk to potential clients; they are turned off when we tell them our focus is on the strategic side of their business. They usually say - I am not interested in strategy; I want to get help hiring employees, creating marketing materials, or getting sales channels. With a strategy and an understanding of where the business is headed and the costs associated with getting there, you will be better able to track your goals and know what you need to do to meet them. You may be spending money and time in the wrong place. You have to have an overall strategy for your business. If you don't, you most likely will not succeed long term, be able to secure financing from a bank or investor or sell the company down the road. Strategies are not there to bind you, as strategies in businesses can change on a regular business. They are there to guide you to help you reach your goals.
Defined & Documented Processes & Procedures
It is fine when you are a Soho business as you are doing everything, but the minute you have one employee or have someone besides yourself performing work, it is at that time you need to have defined and documented processes and procedures. Whether that is a credit and payment process within finance, an employee handbook in human resources, or a sales process to follow, all will help you manage your business. If there are no processes and procedures within a company, chaos starts to take over.
Best Practices
There are best practices in every area of a business. For example, in HR, one best practice is to have defined job descriptions for your employees so they understand their job. Another is to ensure each employee knows to whom they report and receive regular feedback and performance evaluations. For operations, one best practice would be to have suitable systems in place to track what you need within the business, whether financial information, sales, or employees. An overall business best practice is to have employment contracts, vendor/supply agreements, or reseller contracts. Lawyers should write or review contracts to protect you and your business.
Measuring & Monitoring
It is essential to be able to measure and monitor your business performance. When you have a strategy in place with goals defined and how you plan to get there, defined and documented procedures, and utilizing best practices, it becomes easy to measure and monitor your performance. For example, if you aim to achieve 10% growth, you must measure and monitor your success. Every business should have a marketing plan and sales personnel with quotas & contracts to support generating that revenue. A company should also have a credit strategy where you collect down payments and collections for those that do not pay on time and a proper financial system to track revenues and expenses. In that case, you can monitor your performance. Even if you didn't reach your goal, you could tell exactly where there were issues in not meeting the goal. You may determine you didn't receive a return on your marketing; your sales personnel may have yet to meet their forecast, or even your accounts receivable department could not collect on all sales. Knowing this allows you to make the changes you need versus making changes that will not positively affect the business.
Summary
No matter where you are in your business life cycle, business performance is important in ensuring your business runs as effectively and efficiently as possible to reach your goals. Get your free business performance score today if you are wondering how your business is performing. Complete our free business performance assessment questionnaire, which should take you 15 minutes on eight areas of your business (all multiple-choice questions). You will receive a report outlining your overall score, individual scores, and a summary of areas that need improving.