We conclude this series this week with a look at two areas of business that are often ignored by entrepreneurs: the processes and the profits.

Most small businesses are started by one person or a small team. As the business grows, processes are generated on the fly and often made up when and where needed. This is great as it supports the entrepreneurial mindset and fast-growing nature of the business. But as things develop and other people join the team, they are left alone and often confused about what to do when and by whom. They refer things back to the original owners, who then just do things themselves, mostly because it will take too long to explain things to others and get them to do it, so they take it upon themselves to do it. Faster, easier and cheaper – Yes? Well actually NO.

Developing strategy for your internal processes is key to the development of any business from craft to enterprise. A clear set of processes that can be found and followed by anyone within the business and any new staff member, is key to growth. It also gives a sense of assurance to the business owners that things will be done and done according to the process.

Developing processes is also the key to creating internal models, frameworks and procedures that could be converted into sellable products in the future. A lot of what we coach our clients today started out as an internal process that developed into a workable model, workshop, coaching tool and online course.

The strategy around profit is just as important to the sustainability or your business. Turnover for any small business is the first measurement that we look at; but very soon, this needs to be expanded to include accounting items such as the cost of sales, expenses leading to gross and net profit. The big step for most business owners is to go from a cash business to one with proper accounting processes and reporting. It is also key to, as soon as possible separate the business money from personal money and then begin to manage the business based on profit, not turnover.

These and others we will unpack a bit more in the webinar on Wednesday. Join us HERE to be part of the live class or to watch the recorded version later.

We continue this week with our discussion on Performance Measurement. Last week we explored some practical examples on how businesses in different sectors can measure their performance using NFPIs.

This week we conclude the topic by looking at the product or service that the business offers and how the business can measure the performance of their operations.

The product or service that the business offers is the ‘raison d`etre’ of the business or the purpose of its existence. A lack of quality can lead to customer dissatisfaction and loss of sales. A company should always critically and objectively review their offering and compare it to the competition and customer expectations and needs. Business owners or managers should ask themselves:

·         Is my product or service offering good value?

·         Does it deliver quality superior performance?

·         How does it fair relative to competitors?

·         With industry developments, can my product or service remain relevant with changing technological trends?

In Summary, the following are good examples of NPFIs:

Product quality

• Percentage of items rejected by quality control
•  Number of items returned by customers

Product delivery  

•  Percentage of customer orders delivered on time
•  Waiting time from order to delivery
•   Cycle time

Customer satisfaction      

•  Number of customers returning
•  Number of complaints

After-sales service             

• Waiting time
• Number of complaints
• Use of customer surveys to measure their satisfaction.

Benefits of Non-Financial Performance Indicators

The balanced scorecard philosophy asks the critical questions at the heart of business growth and sustainability. It looks at performance from four perspectives:

1.       Customer Perspective –how do we look to the client, customer ratings?

2.       Internal business process perspective –at what must we excel?

3.       Learning & growth perspective –continuous change and growth in a dynamic innovative age.

4.       Financial perspective –how do we look to shareholders?

These four factors complement each other; for example, relatively greater customer satisfaction will result in greater revenues and profits, consequently improving the financial perspective.

Financial performance measures are lagging indicators of performance, this is because financial performance is a result of past decisions. On the other hand, NFPIs are lead indicators in that they drive future financial performance as they focus on the customer, internal business processes and learning and growth.