Why did you set up your business?

Perhaps it was to have more time with your family, to have financial freedom or perhaps because you really hated your job. Every business is different and success looks different for each person. Whatever your goal is in your personal life and business, you need to be clear on what success looks like for you.

Imagine if we were to meet in 5 years’ time, what would have had to have happened in your personal and business life for you to conclude that you have enjoyed success? How would your life be different?

By tracking and improving just a few key growth drivers, you can almost certainly grow your revenue, profits and equity value. However, every business is different and some growth drivers are easier to move than others so its important to recognise the most important ones in your business and which ones to focus on first.

Are you measuring the right things?

Most businesses are using lag measures, meaning reporting on outputs which have already happened. Sale, profit, cash in the bank and the value of your business are normally delivered as a set of statutory accounts that you don’t get to see for maybe 6 – 9 months after your year end. These are all outputs based on ancient history meaning they are useless for effective management control.

What if there was a better way?

By reporting on input drivers instead of output drivers, you’ll be able to understand, measure and review on a regular basis and what’s more, make changes to keep you on course to achieve your goals.

Although the terms might be slightly different for each business, the fundamentals are the same and will apply to every business. So where next?

Should you focus all your efforts on new customer acquisition?

• Should you concentrate on cutting overheads?
• Should you try and increase average transaction value?
• Should you try and increase profit margins?
• Can you persuade customers to purchase from you more frequently?
• What difference would improved customer retention make?

The key is to make incremental improvements over time for each key growth driver.

There are 6 business growth drivers plus cash flow.

Cash flow

•  Margin
•  Quick win cash
•  Acquisition
•  Retention
•  Transaction value
•  Frequency

Not all drivers are as easy to alter as others and depending on your situation and what you are trying to achieve, some have far more impact on the business than others so its essential to understand them all in detail.

If you’re serious about growing or simply improving your business, we’d love to hear from you:  hello@opticsaccounting.co.uk