August 17, 2011
As an entrepreneur, you owe it to yourself, your employees, and anyone else who has a vested interest in your company to make the business as profitable as you can. You can make sure that happens by identifying business drivers that will bring in more revenue as time goes on.
With the competition becoming more aggressive, making sure that customers continue coming through your doors can be a difficult enough task. Without growth, however, you could risk losing your market share through stagnation.
That’s why it pays to know what causes people to choose your services over what your competitors offer and to be aware of key business performance indicators/KPI’s.
Only by being fully aware of those driving factors can you foster growth and make sure that your company is able to not just weather tough financial times, but fully capitalize on the conditions of strong economic climates as well.
As you know, there are a number of factors that influence whether or not people come through your doors, so it isn’t as simple as pinning down a single trend, event, or practice that makes money and causes your business to thrive.
So what are some ways that you can go about identifying business drivers to help your business thrive?
Drivers are, by definition, things that have an impact on your business one way or another. These can come from within, or they can be factors that come from the outside.
Either way, there are many of them, so it can be a daunting task when you’re trying to figure out just where to begin.
You obviously want to make sure that any drivers you pick out can ultimately be profitable for the business but, beyond that, what else should you go on?
In general, you want to make sure that any drivers you identify show your company’s performance and can be compared to other figures. Whether those other figures are previous numbers of your own from the year before or are something that is standard across your industry is up to you, but having something to measure against can be a huge benefit.
Besides knowing just where you stand, you can use drivers to set realistic goals and craft a plan for where you want to be in a given amount of time.
When working on identifying business drivers, it helps to try and find patterns in your business cycle that not only show what’s happened in the past, but show what’s likely to happen in the future based on where things have gone in the past.
Think about it this way: Just about every retail store in existence sees a massive upswing in revenue toward the end of the year because of the Christmas shopping season and management plans accordingly. They are able to determine what items will sell, where additional people will be needed and what hours the stores will need to be opened.
All of these decisions are based on things that happened around the same time in the previous years. By looking over that information, they can prepare for the increased traffic. By being prepared for that increased traffic, they’ll be better able to accommodate the additional customers who, in turn, will spend more money.
When you’re identifying business drivers, it pays to look at the people who are spending the money that keeps you in business. Ask yourself questions like:
By answering questions like these, you can narrow down a target demographic and focus on marketing to them. Doing this may also help you indentify a need these people have that isn’t currently being addressed and, if you capitalize on that, you could easily corner a niche that will bring in more revenue.
The people who work for you have just as much influence on how your company develops as the people who spend money on it.
You have to make sure that they are properly trained and properly motivated about their jobs. When you increase the productivity of your staff, everyone ends up benefiting in the end.
How much you spend on the business should always come up when identifying business drivers. If you’re bringing in money and a large portion of it goes to maintaining your company, then you may need to readjust some of your practices in order to increase profit margins.
When thinking about costs as a driving factor in your business, you’ll have to look at everything from the equipment you use, to the space you occupy, to the pay of your employees to determine if costs are justified in each area.
By looking at costs as one of your business drivers, you can easily track every penny that goes out and make sure nothing is going to waste.
By seeking out and identifying factors that influence your business, you can easily change your practices to foster growth and guide your business towards success.
While these aren’t the only factors that can affect the performance of your company, they are some of the most prevalent.
At the end of the day, you’ll have to work at identifying business factors that you can find in order to improve your operations and continue bringing in revenue.
Once you get a sense for what those drivers are, however, your company will be well on its way to substantial growth.
Remember, running a business successfully does not need to be complicated. Keep it simple!
For more ideas on how to grow your business, please check out our website.
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This post is a part of a series that helps you identify opportunities and problems within your small business.