As a small business owner, you're juggling a million things, leaving you feeling overwhelmed, unproductive, and uncertain. You're not alone. Two years ago, we started working with a small business owner who was generating more debt than income. He was growing increasingly frustrated by how hard he was working and how little return he was getting for his efforts.
Over the last two years, we have executed the 4 Disciplines of Execution (4DX) approach to turn his business around. The 4DX approach calls for leaders to focus on the wildly important, act on lead measures, keep a compelling scorecard, and create a cadence of accountability. The balanced scorecard we developed after our first two sessions, along with the weekly scorecard we made from that document, has helped to give his business more focus and consistency. Updating this weekly scorecard, reflecting on wins, and developing solutions to address misses to goals has led to back-to-back years of double-digit earnings growth. The owner is now making over 6 figures a year, and he has the 4DX, Balanced Scorecard, his mindset shift, and commitment to continuous learning to thank for more profits and less stress.
Many entrepreneurs struggle with prioritizing tasks and making strategic decisions. The balanced scorecard is a powerful tool that can bring clarity and control to your business. Major consulting firms like Boston Consulting Group and business schools like Harvard teach business leaders how to use this tool to drive higher levels of growth. You do not have to hire a big-time consulting firm or get an MBA to use this concept. Throughout this article, I will share how to set up a balanced scorecard.
Financial Goals: The Foundation of Success
Financial goals provide a snapshot of your financial health. While you have autonomy in choosing your specific targets, consider these three key metrics:
Revenue: A strong indicator of how well your offering resonates with the market. Rising revenue suggests growing demand for your products or services.
Margin: This reflects your business's efficiency. Increasing the percentage of revenue converted into income can help you achieve profitability goals with fewer inputs.
Payroll as a percentage of revenue: Labor tends to be a company's most significant expense. Paying attention to the percentage of revenue that goes towards labor can help you determine if you are getting the most out of your labor spending.
Pro tip: Review your financial performance for the past year and establish challenging but achievable targets.
Customer Goals: Converting customers into profits
You need customers to achieve your financial goals, but not all customers benefit your business in the same way. Establishing customer goals can help you focus on the customers who will fuel your financial goals.
l. Define these three customer-centric goals:
Number of Customers: Determine the target number of customers you need to serve to achieve your financial objectives. This helps you visualize your lead generation needs.
Customer Frequency: How often do you want customers to purchase? This helps you strategize for repeat business and determine how many customers you need overall.
Customer Satisfaction: Measure how well your product or service meets customer expectations. You can use metrics like net promoter scores.
Pro tip: Calculate the lifetime value of a customer to help you determine how much you should be willing to spend to acquire a new customer.
Process Goals: Streamlining Operations
Process goals focus on the activities that drive your customer goals. Consider what processes you need in place to achieve financial and customer goals. A few to consider would be:
Customer Acquisition Activities: Set goals around marketing efforts, such as social media impressions or website traffic.
Operational and Execution Activities: Focus on delivering consistent product and service quality. Establish goals that help you identify and improve the quality of your products and services.
Business Activities: Set goals for internal processes like financial reviews or stakeholder meetings to ensure you're dedicating time to key business drivers.
Pro Tip: Consider your current systems and identify the bottlenecks that impact your ability to attract and retain customers. Establish metrics to help you identify if you are removing those bottlenecks.
People Goals: Investing in Your Team
Our Power6 Leader program teaches business owners the success equation of culture x processes = results. Setting goals around selecting, developing, and inspiring your team will help you build an organizational culture that can leverage the processes you have in place to achieve your business goals. We encourage goals around the following:
Professional Development: Set goals for the amount of time you will dedicate to professional development to ensure you and your team have the knowledge and experience to lead effectively.
Performance Conversations: Evaluate current team gaps and work with them to develop individual development plans to help them grow the skills, mindset, and experience they need to thrive.
External Partnerships: Identify key external relationships, such as with marketing experts, coaches, lawyers, or accountants, and set practical goals for selecting and managing these key partners.
Pro Tip: Make a list of all your employees and key partners. Write down their strengths, weaknesses, and capabilities. Reflect on where you have gaps and how you can better leverage the talent around you.
Putting it All Together:
By setting these 12 goals and assigning metrics, you will gain clarity on your business objectives and how to prioritize your time, money, and resources. Once your scorecard is built, establish a routine for reviewing your performance and identifying ways to achieve your goals. Each time a new opportunity presents itself, ask, "Where does this fit into my scorecard?" If it does not align with helping you achieve one of these 12 goals, you should ask yourself if you should pursue this opportunity.
Creating a disciplined approach to running your business will help you stay focused, measure results more effectively, and learn faster. The Balanced Scorecard provides a framework for strategic decision-making, allowing you to move from feeling overwhelmed to feeling in control. It's a powerful tool for any small business owner seeking sustainable success.
Thank you for reading our latest blog. Hopefully, you have a better understanding of a balanced scorecard and how it can help you with clarity and direction. If you are looking for help establishing your goals, start by going back and reading our previous post. Over the last few weeks, we have covered each of these topics.
If you have any questions, or want to sit down and discuss your current strategy, email Executive Coach Dorian Cunion at dcunion@yourpathexecutivesolutions.com
One of the suggestions we provide clients is to leverage as many free resources as possible. If you do not have a SCORE mentor, visit their website, check out their resources, and find a mentor. Richmond | SCORE
Verizon Small Business Ready is also a great free resource you should leverage to help you understand different business concepts. Here is a link to their website Verizon Small Business Digital Ready - Landing
The SBA, and The Department of Small Business and Supplier Diversity also provide great resources for small businesses.
We are always here to help you on your path. Whether you are looking for thought or accountability partners, need help overcoming a mental block, or mastering a new skill, we will provide you with the guidance and support you need to achieve your business goals.