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How do I measure success and growth?

Success is not just defined by how much money you make. There are various factors to consider including turnover, debts, staff turnover and morale, and customer satisfaction. You should also consider how the business is impacting you on a personal level. This page looks at the various factors to consider when evaluating success. 

What is success?

There in no one single thing that defines success for a business. There are a number of factors to consider, some businesses may succeed in some areas and fail in others. Just because a business boasts to be doing well and appears to be growing there is no guarantee that it is actually successful.

We always make a profit each year so we must be successful

Profitability is one way of measuring success. It is naive and maybe complacent to think that because your business is showing a net profit that it is successful. There are other financial and non-financial factors to consider.

Your turnover decreasing may not be a bad thing

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Turnover is the amount of money taken by your business in a particular period.

Maybe you have chosen to only work for the customers that give you the biggest margins? Perhaps there were jobs you were doing which were not earning any profit or even losing money? In that case reducing your turnover by not doing these jobs is, in fact, increasing your bottom line profit as long as you cut costs accordingly.

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Review your debts

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While some debts are a necessity, especially during the startup phase, there are certain warning signs to be mindful of.

Check that trade creditors are paid on time within the agreed credit terms, and that HMRC is paid up to date VAT, PAYE and Corporation Tax. If any of these are not paid then why is that? You may be making a profit but are the directors drawing too much? Or are your customers not paying you quickly enough. Making a profit is important but so is ensuring the long-term sustainability of the business.

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What other factors should I consider?

Staff morale

Any business owner will tell you that the happier their staff are the more productive they will be which in turn should mean the greater the bottom line profit. You can measure staff morale by speaking to them regularly or at least speaking to staff representatives in a larger firm. You will get feedback from ‘the shop floor’ good or bad which will be able to help you make decisions.

Staff turnover

If you have a high turnover of staff you need to look at why this is. Perhaps they are unhappy with their pay or with the working conditions? Different people are motivated by different things. As the business owner, you should make it your business to find out what motivates the people working for you. Some may be motivated by higher pay, others may value work/life balance and flexibility more.

How do I measure customer satisfaction?

A business needs to be built on solid foundations in order to achieve sustained success. Unhappy customers may bring short term success. But, to ensure you can carry the success on over a number of years, you need to ensure you have a solid customer base who are happy to keep coming back to you and will hopefully recommend you to others.

Let’s look at John the mechanic. His first year showed a good profit, but the second year he made a small loss. John had lost a lot of his customers who found him quite expensive and didn’t think he was particularly helpful. They were also annoyed that John would not tell them how much the work would be until after he had done it. They didn’t use John again. So, although he made good profit from these customers in the first year, he could have gained himself a solid customer base by being more open about his prices and going out of his way to help. This customer base could have grown as they recommended other people.

What is growth?

Like success, growth can be measured in a number of ways. It might be turnover, profit, staff numbers, customer number or market share.

Some small businesses may be happy just to maintain the customers they have and continue to make steady profits each year. Some business owners, however, may be coming up to retirement age and want to think about selling the business. If this is the case they will want to grow the business to ensure they receive the maximum amount of money they can when they sell it. They will look to grow the number of customers or increase the services they offer to existing customers which in turn will increase turnover and hopefully profit.

How do I measure success on a personal level?

Ultimately, the reason you started your business was for the benefit of you and your family. So when it comes to measuring the success of the business you have to ask yourself if you personally feel that you have succeeded as the business owner.

  • Are you earning what you consider to be sufficient reward for your efforts?
  • Are you achieving what is called a good work-life balance?
  • Do you feel happy and fulfilled in the work that you do?

You would think that if the business is considered to be a success then you would too? But if the success of the business is coming at a cost to the owner (for example, you’re working every hour to ensure the success of the business) then that is clearly not sustainable. Perhaps you should consider using some of the profits to employ more staff and ease the strain?

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