Aren’t you glad you’re not public? If you were, you would likely be stressing about your quarterly earnings release instead of thinking about how to grow your business.
I spent a decade working for a public company about ten years ago. At the time, I thought chasing quarterly earnings was at odds with the culture and values my then-partners and I worked so diligently to maintain. Over time, though, I have come to appreciate the impact on performance that a regular review of results can have.
Analysts review the results of public companies on behalf of investors on a quarterly basis. As a business owner, who challenges you? In this article, I am going to suggest that you challenge yourself on a quarterly basis. You should set your own expectations, determine your progress against them, and then course correct for the next quarter.
Review Your Progress in Order to Grow
Reviewing progress implies that you know the goal. If you haven’t already set a strategic goal, now is the time to write one down. It doesn’t have to be in final form and you can revise it later to invest more time or involve more of the team in the process. It does need to be expressed in terms of the performance of the business. Revenue, earnings, numbers of customers and production volume are all metrics that can be used to establish the goal.
In order to manage performance, an independent yardstick is required, even if it’s to be the same next year and continue the current successful direction. We’ll assume for now that your goal is to double sales in three years.
You are now in the same position that every Fortune listed CEO is in at the beginning of the fiscal, or business, year. You have set a goal or, in public company speak, an expectation. In order to meet that expectation over the course of several months, many things may need to happen. Let’s break that goal into bite-sized monthly chunks of activity required to make it a reality.
In order to double your sales in three years, you will need to grow your business about 26 percent per year, or a little over two percent per month. In many businesses, sales don’t actually grow smoothly. A big contract or order might come in and business would grow a lot one month, while little or no growth might occur in another month. Measuring progress on a quarterly basis can help because it evens the peaks and valleys somewhat. To determine progress against our goal of doubling sales in three years, we want to see quarterly sales growth of around 6 percent.
Next Comes The Challenge
Ask yourself, and your team, how you achieved against the quarterly goal of a six percent increase in sales? Regardless of whether you fell short, or exceeded the goal, you want to ask yourself and your team, “Why?” If you fell short, was it because the sales team was unable to find the business? Or because you could have sold more if you had more inventory, but simply didn’t have the product?
Conversely, if you exceeded the goal, what caused the success? And regardless of success or failure, ask yourself if the causes are likely to continue or if management action is required to avoid them or encourage them. In this activity, we are trying to get at the root causes of our successes and failures and have the organization learn from them.
It is often smart to have someone looking over your shoulder while you do this challenging activity. Someone with your best interest at heart, someone you feel comfortable accepting difficult messages from. The most successful leaders have an independent advisor or mentor assist with this activity. We all have a built-in bias that can prevent us from seeing. Having a second set of experienced eyes helps ensure that every quarter’s experience is a learning one.
Over the three-year period we’ve been thinking about, that means 12 learning opportunities to course correct and get better. That could include sales, or service delivery, or product development, or whatever it is that we need to learn and improve in order to make next quarter better than the last.
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Editor’s Note: This article was originally published on Jun 20, 2012.