Measure performance and set targets

Measuring business performance and setting targets are essential for growth. While many small businesses operate comfortably without formal measurement or target-setting, expanding businesses must control these processes. This is especially true if they want to:

• hire more staff
• create new departments
• appoint new managers or directors

Benefits of strategic business reviews

Strategic business reviews are useful if:

• you are unsure about your business's performance
• you want to maximise business or market opportunities
• your business plan is outdated
• your business is heading in an unplanned direction
• the business is struggling to respond to market demands

Setting targets for performance measures

Understanding your business performance across different areas helps you see strengths and weaknesses, and shows you where to improve. To get the right information, measure the correct areas of your business known as key performance indicators (KPIs).

Which KPIs should you measure?

Measure both financial and non-financial indicators, such as:

• customers - number of customers, frequency of use, customer acquisition, and retention rates
• customer service - assistance waiting times, complaints, and reasons for customer dissatisfaction
• market share - relative to competitors, and whether it is increasing or decreasing
• staff - employee satisfaction levels, work quality, and attendance records

See how to choose the right key performance indicators.

Benefits of setting targets

After identifying your KPIs and ways to measure them, use this information to set performance targets. Clear targets give everyone in your business specific goals.

Break down your main strategic goals into smaller, manageable targets. This makes it easier to integrate them into day-to-day operations, moving your business towards your ultimate goals.

Setting the business strategy

To set a clear business strategy, consider looking at:

• Business direction - where you are now, where you aim to be in the next three to five years and how you plan to get there.
• Current and future markets - identify the markets you should compete in, strategies to enter these markets, and how they are likely to change in the future.
• Market advantage - determine how you can gain a competitive advantage and outperform your competitors.
• Necessary resources – evaluate the skills, assets, finance, relationships, technical competence, and facilities you need. Consider potential changes in these resources.
• Business environment - include internal or external factors that could impact your ability to compete.
• Measures for success – recognise that performance measures may change as your business grows.

You may not be able to answer these questions on your own. For a more effective business review, seek input from professional advisers, fellow directors, or senior staff. Collaboration can provide valuable insights and enhance your business strategy.