A dictionary definition of success
"Success is the accomplishment of an aim or purpose".
So as a small business owner do you know what your aim or purpose in running your business is? Let's consider the following:
1. why you should measure success;
2. what metrics you should use;
3. what you need to achieve success;
4. what happens when you've achieved success.
But first back to my question, "What's your aim or purpose in running your business?"
Is it financial wealth; being your own boss; industry recognition; doing something you enjoy; delivering a service with a positive social impact; or global dominance, control and power?
Why you should measure success
Some people have a clearer vision than others, but very few actually write it down or communicate it to their team and even fewer quantify it. But if you don't quantify or measure the thing you want to achieve how will you know when you've succeeded?
If your aim is to sell your business and retire, then how much will you need to sell it for in order to achieve that? The answer will depend on what lifestyle you want in retirement and at what age you want to retire at. So let’s say your aim is to retire by the age 50, but you don’t achieve that until you are 55. Would you still consider it a success?
Some people would say yes and others might say no. So, although success is about accomplishing an aim or purpose, it is also about how you, and others, choose to measure results.
When measuring results there are external factors to consider. In this example, external factors are going to influence the value of your business. How is someone else going to measure and value your business? They might not use the same measurement basis as you. And that's why, unfortunately, success isn't just about how you choose to measure it.
Success can be viewed subjectively, from a personal point of view, or objectively, from an independent point of view, but either way you still need a way to measure it.
There are 3 reasons why you need to measure success:
- so you know when you've achieved it;
- so you can manage the journey; and
- so you know when to stop.
"If you can't measure it, you can't manage it"
My first business was all about measuring, monitoring and reporting data to board level directors. We pulled data out of multiple systems, built data warehouses and designed high impact dashboards - what used to be called Management Information Systems. These days it's referred to as BI or Business Intelligence.
Business Intelligence is all about metrics and it doesn't matter how big or small your business is, metrics are important because without data you can't make informed decisions. You might be able to get away with it and use your gut instinct and I've seen a lot of companies do that, but, when the going gets tough you need those numbers and you don't want to waste time pulling them together.
For example, if you’ve got an impending cash flow problem and you need to secure a bank loan or overdraft, your bank manager is going to want to see some numbers. If you haven’t got them to hand then the time it takes you to pull them together might mean the difference between securing a loan or overdraft in time to pay your bills and going into liquidation.
A colleague of mine, who'd run several businesses with varying degrees of success, once said to me "control is a fallacy". Initially I didn't understand what he meant, but he was referring to the fact that when you run your own business there are so many external factors influencing the success or otherwise of your business, that you often have no control. Just like being at the helm of a boat, but having no control over the weather.
But when you have metrics, if you've got a weather forecast, a compass and a map, not only can you make more informed decisions, you can make them faster and that's what you need to do to stay ahead of everyone else.
What metrics should you use?
Even if you're not planning to go on Dragon's Den, I hope I've convinced you that metrics are important and you should know your numbers.
But what should you measure? Well my advice is to measure what matters. Measure what matters to you in terms of you accomplishing your own aims or purpose for being in business AND measure what matters to your stakeholders. By stakeholders I mean your customers, employees, suppliers, bank managers, potential buyers, shareholders - basically anyone with an interest in or who is affected by the activity of your business.
And keep everything as simple as possible. You only need a few metrics or what people call Key Performance Indicators.
Most people start by looking at financials and rightly so, because every business should be focused on return on investment and managing cash flow. But as you know, historical performance is not an indicator of future performance so be sure to measure and monitor forecasts and look at trends. Also, financials alone are not going to give you the whole picture because financial data, however real time it is, lags behind what's actually happening in the business.
For example, if you've got unhappy customers it might take them a while before they decide to go elsewhere but if you identify the problem early enough, you have a chance to do something about it.
A balanced approach will look at your business from different perspectives. At this point, I could go into detail about balanced scorecard techniques and leading and lagging indicators, but I won't. Instead, if you remember to measure what matters to your stakeholders, then I'm sure you will get a clearer and more balanced perspective of how you are managing your journey to success. If you want to know more about balanced scorecard techniques then do get in touch!
What you need to achieve success
In my opinion achieving success comes down to 3 ingredients:
PASSION - if you’re passionate about what you do, then you will inspire and lead others. Passion will drive you to be excellent at what you do and help you to find creative ways to achieve your goals.
PERSEVERANCE - if at first you don't succeed, try and try again. You need to be resilient and resilience comes from within but is also nurtured by having the right people around you.
PEOPLE - you rarely succeed because you've done everything yourself. Usually it's a team effort. Support comes from employees, suppliers, networking groups, professional advisers, your bank manager, business coaches and mentors, and, very often, from friends and family. You might even find support from people who you’ve never met. Many people have read Dale Carnegie's book "How To Win Friends and Influence People" and found it’s spurred them on. People are important - they will help you on your journey to success.
So you’ve got your ingredients for success, now you need a recipe. It’s summed up well in the Business Clan strap-line: Plan Action Grow, or in this case Plan Action Succeed. To turn a vision into reality, you need a plan and if you don’t action your plan, you won’t succeed.
What happens when you have achieved success?
So, what to do when you've accomplished success? Well, I firmly believe that success should be celebrated. You can celebrate alone but personally I'd rather celebrate with all the people who helped me along the way. It is after all their success too.
And, after that most people who are successful, and it's the same for a business, then set themselves a new aim or purpose and begin a new journey.
Delia Porter, MD & Founder