Business owners: challenge yourselves on a quarterly basisGrowth Strategies — By Jim Lane on June 20, 2012 at 8:00 am
Aren’t you glad you’re not public? If you were, you would likely be thinking about your second quarter earnings release.
I spent a decade working for a public company over a 24-month period about ten years ago. At the time, I thought chasing quarterly earnings was at odds with the culture and values my then-partners and I worked so diligently to maintain. Over time, though, I have come to appreciate the impact on performance that a regular review of results can have.
Analysts review the results of public companies on behalf of investors on a quarterly basis. As a business owner, who challenges you? In this inaugural article, I am going to suggest that you challenge yourself on a quarterly basis, set your own expectations, determine your progress against them, and then course correct for the next quarter.
Reviewing progress implies that you know the goal. If you haven’t already set a strategic goal, now is the time to write one down. It doesn’t have to be in final form and you can revise it later to invest more time or involve more of the team in the process. It does need to be expressed in terms of the performance of the business. Revenue, earnings, numbers of customers and production volume are all metrics that can be used to establish the goal.
In order to manage performance, an independent yardstick is required, even if it’s to be the same next year and continue the current successful direction. We’ll assume for now that your goal is to double sales in three years.
You are now in the same position that every Fortune listed CEO is in at the beginning of the fiscal, or business, year. You have set a goal or, in public company speak, an expectation. In order to meet that expectation over the course of several months, many things may need to happen. Let’s break that goal into bite-sized monthly chunks of activity required to make it a reality.
In order to double your sales in three years, you will need to grow about 26 percent per year, or a little over 2 percent per month. In many businesses, sales don’t actually grow smoothly. A big contract or order might come in and business would grow a lot one month, while little or no growth might occur in another month. Measuring progress on a quarterly basis can help because it evens the peaks and valleys somewhat. To determine progress against our goal of doubling sales in three years, we want to see quarterly sales growth of around 6 percent.
Now the challenge: Ask yourself, and your team, how you achieved against the quarterly goal of a 6 percent increase in sales? Regardless of whether you fell short, or exceeded the goal, you want to ask yourself and your team, “Why?” If you fell short, was it because the sales team was unable to find the business? Or because you could have sold more if you had more inventory, but simply didn’t have the product?
Conversely, if you exceeded the goal, what caused the success? And regardless of success or failure, ask yourself if the causes are likely to continue or if management action is required to avoid them or encourage them. In this activity, we are trying to get at the root causes of our successes and failures and have the organization learn from them.
It is often smart to have someone looking over your shoulder while you do this challenging activity. Someone with your best interest at heart, someone you feel comfortable accepting difficult messages from. The most successful leaders have an independent advisor or mentor assist with this activity because we all have a built-in bias that can prevent us from seeing. Having a second set of experienced eyes helps ensure that every quarter’s experience is a learning one.
Over the three-year period we’ve been thinking about, that means 12 learning opportunities to course correct and get better at sales, or service delivery, or product development, or whatever it is that we need to learn and improve in order to make next quarter better than the last.
If growing revenue and profits is important to you, please join us each month as we peel the onion some more and take a closer look at how to drive profitable growth.
If making progress against your strategic goals is important, join us Fri., July 27 for our executive breakfast on strategy execution.
Jim Lane is the Founder and Director of GBQ Redbank Advisors, the profitable growth division of GBQ Partners LLC. With more than 30 years of experience in successful consulting project delivery, Jim has helped owners and investors drive improvements in every major area of business. By day, Jim helps clients grow and improve profitability, building revenue and improving margins on that revenue. By night, he is a husband, father, adventurer, blogger, ProMusica and Columbus Chamber Small Business Council board member. Click here to learn more about Jim, or contact him directly at 614-947-5257 or email@example.com.
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