Having clearly defined goals and measuring your progress as you move toward them is essential to making your business a success. But how do you determine what's realistic to achieve in a given amount of time?
Two important planning tools can help. A management dashboard keeps track of your performance so you can see how it evolves. Benchmarking helps you compare your performance to that of other industry players. Both tools will help you keep moving forward as you take your business to the next level.
A speedometer and gas gauge give you critical information that helps you get where you're going safely and on schedule; you wouldn't drive a car without them. In the same way, all businesses should monitor certain types of information to ensure that they stay on track. The management dashboard gives you current, objective data about your business, which you can use to make informed decisions.
This tool is also known by many other names, including executive or performance dashboard, key performance indicator (KPI) summary and business scorecard.
Essentially, it is a way for managers to get an at-a-glance view of the most important aspects of their business. It brings together, in a single place, a summary of data collected from various sources across your business. It can include an overview, spreadsheets and graphics such as bar charts or pie charts.
The management dashboard can be created using specialized software packages that give you real-time information updates. But it can also be designed with simple tools like spreadsheet or word processing software, which help you manually track important data on a regular basis.
- The benefits of a dashboard are many. It translates goals into measurable data and provides speedy access to objective information. Graphics make quick assessment easy and allow early identification of negative trends or problems in projects or departments.
Make the most of your dashboard
To maximize the benefits you get from your dashboard, it must be customized for your business. To decide what aspects of your business you should monitor, review your key business goals. These should be as specific as possible. For example, do you want to increase the number of repeat clients or find more new customers? Is improving cash flow a priority? Maybe you want to fill orders faster or reduce the number of returned products?
Based on your business goals, determine which KPIs you want to measure frequently to track progress on these goals. These KPIs should be SMART: specific, measurable, achievable, realistic and time-bound.
Monitor your data
The data for the dashboard should be collected constantly and reviewed regularly. Studying the dashboard is best done as part of your schedule. Over time, you will be able to spot new trends or anomalies quickly.
What you could monitor
If improving your number of repeat customers is important, you could measure the number who submit a second order within a specific period of time (three, six or 12 months). If finding new customers is a goal, you might measure the proportion of leads and referrals that turn into orders within 12 months. If your priority is improving your business's cash flow, you can start tracking the number of accounts that have an excess of 30 days payable. You will quickly notice any increase in unpaid accounts. By acting immediately and doing some collection work, you can correct the situation before it affects your cash flow.
Dashboard software usually presents your data in easy-to-understand formats, such as charts, gauges or warning lights. You can also download dashboard widgets - graphic tools that collect information and display it on your desktop. Like any desktop icon or window, each widget can be moved around your desktop, rearranged or deleted.
If you are considering buying software, know your business requirements. Determine if it accommodates the KPIs you want to track and if you need additional software to collect the data. Verify whether it spans several business areas or is specific to one (e.g., human resources). And ensure that as well as being flexible and easy to customize, it integrates with your other systems, such as client relationship management (CRM) and accounting software. Finally, see if you can change how the reports are created, e.g., by region, by sales rep. or by product.
When you have determined what you need, budget for the costs of purchase, installation, training and yearly maintenance. Factor in the costs of updates or additional components. You may also wish to develop a purchasing plan to spread the costs over time.
Knowing how other companies in your industry are performing will help you develop insight into your own business practices.
Financial ratios are often available that allow comparisons to industry averages and medians.
Leading and innovative firms can also act as models for other companies. Benchmarking means identifying the best practices (achieved results) of industry leaders and then comparing your own business performance with them.
A benchmark can help in virtually all areas of your business and be a useful tool in a business's program of continuous improvement.
Comparing your performance with other businesses also allows for enhanced strategic planning, more efficient operations and improved products and services.
There are six basic steps to successful benchmarking:
- Identify the area you want to improve
- Measure your performance in that area
- Decide which companies or industry you would like to benchmark
- Determine how you will collect the data on your target
- Compare data collected to your performance
- Develop an action plan to close any gaps you may discover
The federal government offers an online tool to help Canadians benchmark their businesses against others in the same industry, based on data from Statistics Canada. To get the full benefit, you should enter your entire firm's financial data.
Benchmarking and best practices should be viewed as a means to gain insight into your own business processes. Make sure you understand why your target was successful before emulating it. Practices that work for one company may not necessarily work the same way for others.
Therefore, you should carefully evaluate whether a best practice can work for your business, which may be a different size or have different markets or strategic orientation. Practices should act as a source of inspiration. You can then adapt them to reflect your own realities and needs.
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.