Peak Performance or Pathway to Hell

The value of Business Performance Indicators

Often, we are brought into a business when things have reached a crisis point. One of the common reasons that things reach such a point before action is taken is that the owner is not working with any business performance indicators (BPIs) to alert them earlier that things are getting off track. Assessing performance by looking at a standard business report like a Profit and Loss statement won't identify the issues specifically and the results come too late to take prompt action.

Business performance indicators help assess and manage a business in areas like production and administration. Production indicators like chargeable hours per producer for services companies, number of jobs on the board for a recruitment business, can alert them to issues like sales trends, productivity, and capacity utilisation. Administratively, BPI's like number of debtor days, can tell us about impacts on cash flow.

Recently, we were brought in to work on a succession plan; while the business had done okay over its life from an income point of view, it had certainly not run at its optimal level. It was saddening to see the impact this underperformance was having on its end value now that it was time to sell. There was no crisis as such, however there was an unnecessarily large overdraft; but because there were no BPIs established, the owner had no way to assess what it could and should have been producing as a return for him and what the affect on valuation would be.

Setting and monitoring these indicators is like knowing what our body temperature should be, so that we know if it goes up or down there is a problem and the degree of seriousness of the problem.

BPI's are not about having to run at peak performance or being there just to avert crisis. It is about establishing a benchmark of where the business needs to run at for owners to be getting the return they want or expect (and deserve) for the risks they take in running a business. Importantly also, it gives clarity about what is going on to minimizing stress.

For every business, there are a handful of indicators that if set and monitored can keep things steering in the right direction and allow for immediate action to be taken if necessary. Better to be making small corrections along the way than trying to turn the ship around when it is about to hits rocks.

What are the key things you need to monitor in your business?
Call us for an initial meeting to assess your businesses performance.
It's on us!
Call 0413 670 417
Email support@whiteroomgroup.com.au
Visit www.whiteroomgroup.com.au