Many business owners focus on the day-to-day running of their business and forget to stop from time to time and find out how far they have come, where they are and where they are going. This is a reason for some business failures.
Every business has goals to reach and objectives to achieve. At every point in business you are either somewhere or nowhere in achieving your business goals. Where you are in achieving your goals can only be known when you evaluate your business or organization.
Some Of The Reasons To Evaluate Your Business
It will help you in making business decisions and taking actions for the good of the business. Without evaluating your business, you won’t know if it is the right time to employ a new staff or get into a new market, or even go into a new production. You won’t also know how to use the resources you have and when.
It will help point you back to your business plan which could sometimes be out of date and need to be updated.
However, the main reason for evaluating your business is to find out whether the business is achieving her set goals or not. Whether your goals are long, mid or short term, you must always stop to find out how much you are accomplishing.
When evaluating your business, you need to measure how effective and efficient you are as a business. While effectiveness is about performance and whether you are meeting your goals successfully, efficiency is about how you are using your resources in order to achieve your goals. You are only efficient when you make optimal use of the resources you have.
As a business owner, your decisions are not supposed to be made without good basis. The basis of your decisions is the evaluation you make. That is why you must ensure that your whole evaluation process is well carried out so that your decisions are flawless.
Three Stages To Properly Evaluate Your Business
1. What? You need to determine the different indicators which you intend to measure. Some of them are; level of profit, staff turnover levels, number of customer complaints, level of customer dissatisfaction, number of industrial disputes, return on assets, amount of wastage, etc.
2. How? You need to determine how to measure the indicators above. Information on customer complaints could be harnessed through suggestion boxes, review programs and even open forums with customers. Those from staff could be through open forums with them too.
However, the most conventional way to measure your performance indicators would be through data collection.
3. Why? You need to be clear on what you intend to do with the results/outcome of the evaluation.
Practical Steps To Take In Evaluating Your Business
STEP ONE: Look at the particular objectives you had set for your business, which you want to evaluate. Perhaps you are carrying out an end of the year evaluation; you will need to revisit the beginning of the year to see what objectives you had set. It could be all the objectives or just a particular one you are interested in evaluating.
It could also be a particular policy of your business which you want to evaluate. It could even be your employees, you want to evaluate. Single out one thing at a time in evaluation.
STEP TWO: Establish specific measures or indicators which could be qualitative or quantitative and will enable you measure the performance of the goal, objective, policy or employee. For example:
A possible objective: Noble Restaurant had as one of her objectives of 2014, to increase her loyal customer base by 200.
Possible indicators to measure are:
- Number of customers who visit the restaurant daily/monthly and yearly compared to the number for the previous year
- Number of regular customers the restaurant has
- Distance from the restaurant to where most of her customers are residing
- Number of customer complaints and commendations.
STEP THREE: Decide on how to collect the data for the evaluation. You could use observation, survey, questionnaire, bench marking or interview methods. You are allowed to use multiple methods to get your data. All you need to ensure is that you are getting what you want objectively without bias.
STEP FOUR: You need to analyze the data you have collected and go ahead to interpret it. In analyzing your data, you need to be comparing it with former conditions.
What this means is that for you to say that a policy is performing well, or an objective is being met, or an employee is performing, you need to compare the current state of things with the previous.
For example, if you are evaluating a policy, you should have data on how the aspects of the business which will be affected by the policy are performing. After implementing the policy over a period, you must also get data on the current state of performance.
If it were an employee performance, you will only be able to say there is gross improvement, if there is clear change, backed by the evaluation you have done.
You may also be evaluating your business performance compared to other businesses in the same market (your competitors). Such evaluation is a little different because it is more general. You need to be finding out some of the following:
1. How much has my market share increased?
2. What are my Strengths, Weaknesses, Opportunities and Threats (SWOT)?
3. How many new areas have I covered with my product?
4. How much sensitization have I done on my products and what has been the impact?
5. How well do I use the resources (MEN, MONEY, MACHINES, MATERIALS, INFORMATION, IDEAS, etc.) at my disposal?
6. Where are our competitors at this point?
7. What is our financial situation at the moment?
8. How are we fully satisfying our customers?
9. How quick and well are we, in grappling the new opportunities we meet?
10. What are some of our practices that are not helping our business?
11. What are areas we need to strengthen?
12. How are we meeting up with modern standards and how updated are we in business?
All the above and even more, are questions any business must ask so as to remain competitive in the market. Some of the answers are with the employees while others are with the customers. Harness this information through every possible means you got.
STEP FIVE: The only reason why your evaluation is important is because; you will make decisions and take actions based on your findings. And so, if after evaluating your business, a product, an employee, a policy, an objective, etc. nothing is done, it defeats the purpose of the evaluation.
As the business owner, waste no time to take action which is informed by your evaluation. Some of the results of your evaluation could show that you are on a good foot. This means you have to keep doing what you are doing and even do more. Other results may entail you stop something that is not working. If so, don’t hesitate to stop it and consider a different direction.
Your evaluation is only complete when it leads to appropriate action being taken.
Many businesses are failing today because they don’t regularly evaluate their performance. You can avoid such mistakes if you choose to be different. I believe that one of the most important ways to become excellent in what you do is to keep evaluating your work, correcting your errors, perfecting on your strengths and improving daily on what you do.
The above steps should guide you to take a step today and evaluate all aspects of your business.
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