Running a successful business is not as simple as setting up a shop and hoping things go well from then on. A lot more goes into it than what is apparent to most people. A whole field of business management comes into play here. A part of this management is keeping tabs on how well the business is doing. This articles gives an insight on the importance of analyzing the health of your business and how you can do it efficiently.
Understanding Business Health
A business’s health is actually characterized by how well it is performing and how many of its goals are being achieved. A good business is like a well-oiled and efficient machine. Just like a machine, a business has a lot of parts and segments that need to work together in harmony, and without hindrances, to acquire the required output. A business’s output, just like a machine’s, also depends on how well it has been designed. Business methodology and organizational structure plays a huge part in its output. Ideally, a business should have zero resources wasted and maximum output achieved from the input given to it. However, this is not the case with almost all the businesses we come across. So, having knowledge of all the performance contributing elements constitutes being educated on a business’s health. And one cannot hope to acquire the most out of a business, if its health is not known and actions are not being taken to remedy the discovered faults and imperfections.
Health Parameters and KPIs
When we say that a business’s health has to be analyzed, what actually are we talking about? The measurement of business health depends on a number of parameters. These parameters are related to all sections of the business, including leads, sales, marketing, revenue, customer relations and costs.
The term KPI (Key Performance Indicator) is mentioned a lot in this regard. KPIs are actually the most important parameters or metrics that help in defining the ‘performance’ of a business, i.e. the business’s health.
Important Health Parameters
Properly defining the KPIs for a particular business is paramount. As every business varies in size, target market, nature of product or service offered and goals, a single set of KPIs cannot suffice them all. Also, each KPI may have a different weightage for different businesses, depending on how much and in what way that KPI affects the business outcome. Some commonly used KPIs, that are relevant to most businesses are following.
Customer Acquisition Cost: it consists of all the cost incurred in converting a lead into a customer.
Customer Lifetime Value: this is the measure of how much revenue a particular client can generate for you over a period of time.
Sales Target: it is a measure of actual revenue versus the forecasted revenue.
Customer Churn: the number of customers that did not return to buy from you again.
Return on Investment: ROI is how much your assets contribute to your company’s revenue.
The list of possible KPIs cannot be limited to a certain amount. The important thing is to pick the ones that are ‘key’ to your business and formulate a proper health check and KPI analysis system to achieve your business goals.
How to Do Business Health Analysis
Regarding your business’s health, defining a good set of APIs can only take you so far. You must know how to assess those KPIs and which actions to take on your assessment results. The success of using KPIs largely depends on how you do your analysis. False KPI measurements will lead to false actions, and that will move you farther away from your targets.
Doing this process manually is ill-advised as it takes a lot of company’s precious time and resources and is prone to errors. For proper business health assessment and KPI analysis, certain tools are widely used. These software tools prove to be much better at organizing information, calculating parameters and extracting results.
The use of Microsoft Excel, Google Sheets or other similar software is adopted by some businesses. Although these software are widely available and anyone can easily use them, they do not provide pre-built templates for this particular application. Everything has to be set up and defined manually. All data has to be entered manually and updating information is not that easy. They also become too cluttered if the business size is anything but tiny.
Dashboards – What Are They and How They Can Help
To avoid the discomfort of generic software, a purpose-built dashboard is highly recommended. Dashboards provide a system to organize all the relevant information in a logical manner. You can create separate sections for all the stages of your business process, you can create and organize different departments according to their roles, you can enter information on deals and transactions easily, you can have KPIs calculated and different parameters analyzed automatically, you can have predictions made based on past data and much more.
Dashboards, in essence, provide a bird’s eye view of all your business operations and a high-level understanding of everything that goes into and all that comes out of the business. A few of the characteristics of dashboards that contribute to ease of business health monitoring are listed below.
Concise and Compact Information
One of the greatest benefits of dashboards for businesses is that they provide a compact and concise depiction of all relevant information in one place. You can filter the data according to your need, analyze the whole business, or a certain client or project or study the performance of a particular department, all on one platform. This feature is very helpful in health assessment as all the required information can be made available by a single click.
A lot of these dashboards also provide the utility of connecting other business software for automatic synchronization of information. This saves a lot of time and effort and alleviates chances of errors that come with manual data entry.
Calculating profitability of assets is a major part of business health assessment. With the help of dashboards, different costs and revenues can be calculated automatically. You can find the costs incurred and funds generated by separate clients, marketing campaigns, strategies adopted, prospects targeted, regions explored and resources used. This flexibility and ease of getting all this financial information is, in itself, a great asset.
Dashboards provide a system for organizing all information regarding different clients. You can store and organize all the information pertaining to your customers. With all the data available on the clients, you can evaluate which clients are more beneficial for the company. You can evaluate their behavior and deal with them accordingly. You can also make predictions about what a future relationship can yield based on the past data.
With an eye on all aspects of a business, one can evaluate whether it is going in the right direction and the right pace towards its intended goals. Goals can be defined at multiple levels like new customers to acquire, deals executed, revenue generated and assets acquired etc. As the factors contributing to these goals can be comprehensively organized and formulated, outcomes can be predicted and good predictions give us a good sense of where the business is going to be in coming days.
Making the Right Choice About Dashboards
As explained earlier, dashboards bring a lot to the table in business management and contribute to its profitability. Using software tools like dashboards is imperative in the modern times when the market is highly competitive and businesses try to get any edge they can possibly acquire over their competitors. Automating, synchronizing and organizing all the data related to a business is how you can make sure that your business achieves its targets.
As each business works differently and has different dynamics, how they set up their dashboard and how they use it is also different. Dashboards are to be set up according to how a business operates and what KPIs it has. And if you are not sure about what decisions you should make while choosing or setting up a dashboard, you can always reach out to professionals and experts.