Edmonton Business Plan | How Do Entrepreneurs Use Key Performance Indicators
Great entrepreneurs do not just focus on what they need to do to become successful says Edmonton Business Plan, they also understand what they need to not do, and what to stop doing. The author of the book good to great, as well as five other books Jim Collins says that ìthe good to great companies did not focus principally on what to do to become great, they focused equally on what not to do and what to stop doing. î While so many entrepreneurs already understand the vital importance of reviewing their financial statements regularly, they may not understand that if they focus only on the financial statements in their business, you are only getting one part of a complete picture. Business owners need to be looking at key performance indicators as well, and both at the same time to not see what is going on financially in their business but see what other indicators are that show them what they need to effect changes on, to affect their financial statements.
The reason why financial statements alone is not enough says Edmonton business plan, is because while a business owner can gain great information and great insight into their business such as what the prophet is in their business, but the revenue is especially the revenue compared to the previous year, what are their overhead expenses and what is their gross margin, the only information that a business owner can get from their financial statement is financial. If this shows them that they have the potential of the cash flow issue coming up where they’re going to run out of money, continuing to look at their financial information is not going to help them come up with a solution to that problem. Because of this, business owners can tend to over-analyze the problem instead of coming up with solutions.
Business owners need to ask themselves what are other things they can focus on in their business besides looking at the financial information. Problems that they may encounter in their business include things such as running out of money, decreasing revenue, the high turnover rate in staff, problems finding the right staff, reducing costs. Well business owners can see the effects of those problems by reviewing their financial statements says Edmonton business plan, it is not going to help them fix the problem by reviewing these numbers. Key performance indicators are quantifiable facts that business owners are going to be able to use to help figure out how to fix those problems that business owners have, and then once they fix those problems, they will be able to see the results in their financial statement.
Edmonton Business Plan says that even though many entrepreneurs do not believe that key performance indicators necessarily have to be quantifiable, the best ones are. It is possible to come up with hard, quantifiable numbers that are going to be able to help entrepreneurs affect change positively in their business.
It has been impressed upon almost all entrepreneurs how important it is to review the financial statements of their business says Edmonton business plan. However, many business owners do not understand that they have to look at more information in their business than just financial statements alone. The reason for that is because while business owners can get a lot of great information from their financial statements, such as profit, margin, overhead expenses, and revenue, all that a business owner is going to be able to get from their financial statements or financial numbers.
If the financial statements indicate to a business owner that revenue is increasing, decreasing or even if there is a projected cash shortfall in the business, if an entrepreneur continues to only review the financial information, they are not going to come up with an answer to the problems. Edmonton’s business plan says they need to focus on other members in their business that do not exist in their financial statements to come up with solutions. This is where key performance indicators come in. Because key performance indicators include quantifiable information and hard numbers that business owners can look at to help them decide how to make changes in their business that is going to positively influence their financial statement.
Some of the best key performance indicators that a business owner should look at are directly related to the top three reasons why most entrepreneurs fail in business. The three most common reasons that businesses fail are they run out of money, they cannot find enough customers, and they cannot find the right staff. If an entrepreneur can create key performance indicators that they are going to be looking at in regards to these three main issues, they should be able to affect change on their financial statement when they make adjustments to those key performance indicators. An example of how it is done is that some key performance indicators that can help entrepreneurs review the top business reason that entrepreneurs fail is that they are running out of money. Key performance indicators that can be used about this is how much money are they spending on advertising, how many impressions there were advertising pieces have, how many clicks are they getting on that advertising and the number of leads that it generates. Other information that KPIs can help a business owner track is the number of Google reviews their business has. The reason why this is so important says Edmonton Business Plan is because 80% of potential customers check Google reviews before they make their decision on what company they want to buy from.
By coming up with the key performance indicators that are going to be important for an entrepreneur to track, they can be reviewing their key performance indicators alongside their financial statement to see the full picture of how their business is doing, and what they can do to impact it.