Looking Back to Get Ahead
Business goals are no different. Setting goals can ensure your practice continues to grow – or at least doesn’t remain stagnant and unfulfilling. However, setting goals alone won’t cut it. Unless you evaluate what it will take to achieve them and you track progress towards them, goals are essentially useless.
So how successful were you in 2014? Ideally, you set business goals in January, outlined a few action steps to get you there and made plans to measure progress. If, on the other hand, you did not set goals it is not a total loss - you can still determine whether or not you were successful with three simple steps:
1. Define Success
2. Collect Relevant Information
3. Analyze The Information
To determine success, you must first define what success means to you - and you need to be specific, measurable and relevant (yes, these are only a few of the “S.M.A.R.T.” goals acronym). For some companies, success may be 10% profit growth year over year or an increase of 20 customers per month. For others, it may be less focused on money and more about improving quality of life or growing thought leadership. How you define success depends on how you define your practice, your business and what you are looking to get out of it.
This can be difficult for some. To get started, try finishing one of the following sentences:
“I know I am successful when…”
“I know my firm is successful when…”
“I know my partners and I are successful when…”
It may sound corny, but you know better than anyone what is most important to you. As I say at least a dozen times a week to small firm owners…get it out of your head and on to paper.
Collecting Relevant Information
I have lost count of how many times I’ve walked into a practice and seen the avalanche of information owners/partners access for their business. It’s daunting for any business owner. How you define success directly impacts what types of information you need to collect. If you don’t already know, I’m a huge fan of data – but ONLY relevant data. Generally speaking, the types of business information used to determine success can be divided up into three main categories: Hard data, soft data, and subjective data.
Hard Data: This is exactly what it sounds like - numbers that can be easily accessed and interpreted. In the above story, the difference between my 1/2 mile splits at the start and end of a month would be hard data. I got faster, slower or stayed the same - those are the only real possibilities. Revenues, profits, realization rates or just about any quantifiable number your bookkeeper can easily pull for you would be examples of hard data.
Soft Data: Soft data is slightly more difficult to access and interpret primarily because it takes a bit of leg work to collect and can be somewhat subjective. Examples would be the quality of your clients or the quality of your referral network. The data usually exists somewhere; it may just be a matter of defining and finding it.
Subjective Data: As the name suggests, this is information that is not tangibly quantifiable by QuickBooks or your practice management software. However, some of the most important success factors in business can start out as subjective. In a previous life, I helped a well-known consumer products company determine and quantify their relative “coolness” ranking vs. competitors. For your business, this could be quality of life, your business reputation or what your client’s think of you.
For some, figuring out where to get the relevant data you need can be just as hard (or time consuming) as figuring out how the college football BCS ranking system used to work. But don’t let that dissuade you. Start with what you know and then look for help.
(For more business examples of hard, soft and subjective data, please check out our free resource that is part of this newsletter)
Once you have collected your relevant data, it is time to sit down and analyze your findings. To do this, I would break the process down into three main steps: Trends and Anomalies, The Why and Ways to Improve.
Trends & Anomalies: looking for trends and anomalies in your data takes practice. Trends are patterns and serve as a starting point. Anomalies are exceptions and can be just as informative. You may see clear trends (e.g., linear, positive growth) quickly, but it may take some time to see more subtle patterns (e.g., none of the technology referrals from Ed pay their bills on time). Did you average $70,000 a month in new business and then in May only bring in $20,000? Has cash flow become extra difficult to manage recently? Or has the quality of your clients dropped over the past two quarters? You should take note of trends and anomalies like these.
The Why: now comes the fun part…determining the underlying cause(s) of major trends and anomalies. This requires a combination of critical thinking and detective work and the answer is not always a single factor or one that is readily explainable. Is May the off season for most of your clients’ businesses? Did something negative get posted online about your paralegal? Have you been reluctant to go after the more difficult cases because they have a longer cycle time? Identifying triggers that impacted your results is a key step in planning for next year. Now prioritize these results and determine which (if any) you want to improve on or sustain going forward.
Ways to Improve: for each priority, outline a few action steps you (or your firm or an outsider) can take to either improve or sustain the result you identified. For example, if you identified a drop in client quality as a result of taking referrals from a new source in April, outline a few steps to tighten or replace that referral source. These action steps will help keep your 2015 goals from becoming useless.
There you have it - a simple, straightforward way to determine if you were successful this year even if you didn’t set any goals. Along the way, you’ve documented what success means to you, probably found some additional information you will need to set better goals for next year and outlined some action steps to get you there. If your competitors aren’t reading this as well, you’re already a few steps ahead of them. Imagine how far ahead of them you will be next year.