What you don't know about your business09th May 2018
How does the CEO of a big company like Tesco, McKinsey or Johnson & Johnson know what’s really going on in their company?
Unlike the heads of start-ups or very small companies, they can’t possibly see what’s going on in every department or branch for themselves. They can’t be on the ground in every office, tracking what mistakes are being made and what challenges crop up - and it would be a colossal waste of their time if they were!
In reality, they are probably rather detached from the day-to-day operations of their business.
So how do they keep their finger on the pulse? How do they get the truth about whether their business is healthy, and where to focus their attention?
When you’re head of a business that size, you have to rely on others to give you the information you need.
This can come in different forms – during board meetings, updates from your senior management team and so on.
But the #1 tool at your disposal is your Key Performance Indicators.
The business tracks important measures, which show immediately how different parts of the company are performing. As the CEO, you can quickly evaluate what’s working well, and what isn’t.
Now, the need for KPIs may seem obvious if you’re talking about a multi-billion pound company.
But if you aim to get from £1 million or £2 million to £10 million and beyond, you need the same system in place.
If you’ve grown a business to that size, you probably don’t realise how little you know about the inner workings of your company compared to the early days, when your business was much smaller, and you were more hands-on.
You probably no longer know all your clients, suppliers or staff. And you are definitely not as involved as you used to be with their affairs.
That means that – just like that billion-pound CEO -- there’s a knowledge gap you need to bridge, in order to make informed decisions.
The kind of KPIs you should be tracking include:
- How’s your cash flow?
- Which customers are taking too long to pay?
- How profitable are you?
- What are your margins
- How efficient are your employees – for example, if you’re in a service business, how much of their time are they charging for? How often are they over-delivering to your clients, losing you money?
- Which departments or teams are under-performing?
A few years ago you may have had an instinct for these kind of questions. Now you need the hard numbers.
Of course, the exact KPIs you need to track will differ from business to business. You need to work out what information is most useful to you, so that you can develop an effective strategy.
Collecting this information is usually the job of your finance department.
But if you don’t have one, you do not have to be held back.
As your outsourced finance department, we can collect these numbers on your behalf. Not only that, we help you interpret what the numbers mean for your business, and work with you so you make the best financial decisions as a result.
To get the kind of financial information larger companies take for granted – and which is fundamental to their success – just hit ‘reply’, and let’s talk about how we can help.
Remember, the best way to become a bigger company is to start acting like one now!