There are many different ways to measure your progress in a creative business.
In a recent business advice session with a creative entrepreneur in Ireland, we discussed different approaches to measuring and monitoring the right things, in a way that is practical and useful, as her business develops and grows.
Many businesses have ‘Key Performance Indicators’ (KPIs) that are used to set targets and monitor progress. These can be, for example, the number of new clients, sales value per customer, new products developed, sales income, number of employees, retail outlets, net profit, etc etc.
There are no absolute rules for what these should be. It depends on what measurable factors are relevant to your own business. So you can create your own KPI’s. Whatever works for you!
One issue is that KPIs tend to be numeric measures and so they tend to focus on things that are most easily measured in numbers. And one of the most measurable things is sales income. This is usually very clear – and clearly, it’s important!
But what about other aspects of the business, that are also important but less easy to measure? I’m thinking of things like: customer retention, staff morale, “doing great work”, and job satisfaction. These are important for all businesses, including multinational corporations. And these ‘softer’ can feature even more strongly in smaller enterprises, especially in the creative industries, when the objective is to be a ‘lifestyle business’, ie blending business objectives with a rewarding lifestyle.
So another business technique we can use to measure progress is the ‘Balanced Scorecard’. This provides a broader framework, a bigger picture, of what’s important to the business. Then KPIs can be used, if appropriate, in each of the important areas.
Again, there are no fixed rules, and no ‘right’ or ‘wrong’ way to design and use a Balanced Scorecard. It’s a matter of what areas are important to you and your business.
For example, a classic Balanced Scorecard for a large business would probably include:
1. Financial performance including income, profitability and return on investment (ROI).
2. Customer retention, customer satisfaction and income per customer.
3. Production efficiencies, research and development, innovation.
4. Employee development, training, staff satisfaction and retention.
As an example, in a one-person lifestyle enterprise in the creative industries, there might be four areas that need to monitored and improved to deliver the success the entrepreneur wants. These could be:
1. A nice mix of clients, big and small, bringing interesting projects.
2. Doing great work we can be proud of, that also develops our creative skills.
3. A good income to provide financial reward, free of worries about regularity of income or cash flow concerns.
4. Time off, to ensure a good work/life balance, and time to enjoy life outside work.
In many smaller businesses, the measures of success are largely unspoken and subconscious. In reality, such a business does have a Balanced Scorecard and Key Performance Indicators, even though the people involved don’t use those business terms. They just know what things matter and keep an eye on them, adjusting as they go along…
My advice is:
1. DON’T feel the need to have Balanced Scorecards and KPIs just because you feel you ought to, or because other businesses have them, or because somebody outside the business tells you that you should have them.
2. DO be clear what you want to achieve in your business (ie your own definition of success). Then find common-sense and practical ways to be able to measure progress and monitor the degree to which you are achieving what you want to achieve.
3. Devise a system that works for you! It could be a computer spreadsheet or a colourful wall chart.
4. You don’t have to use the business jargon (but be aware that you now DO have relevant KPIs and a Balanced Scorecard)!
Read also about devising a ‘Financial Control Panel’ to measure progress and help you to drive your business on a day to day basis.