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Harness Company Success in 2015

January 28, 2015

company success in 2015

The power of numbers can lead to the best year yet.

Getting your team to understand company data and numbers can be difficult, but it doesn’t have to be that way. As long as you, as a company leader, know what to look for, what to compare and benchmark against, and what it means to your company, your team can leverage these powerful numbers to ensure better company performance in 2015 and beyond.

As a large company, you most likely have a set of assumptions that helps you, your managers, C-suite, board, and officers finalize the yearly forecast or plan. Internal corporate historical data is a critical piece of information for that process. This data provides the numbers needed for accurate forecasting and paves the way for a focus on execution. Most importantly, this data helps you hold your business team accountable for the success of the plan.

So what are these external assumptions that will accurately predict the success of your company’s 2015 plan or forecast?

Key Performance Indicators

Once you have a plan for 2015, it’s important to set performance measures for everyone involved. Key Performance Indicators (KPIs) help monitor progress throughout the year. You and your team determine these KPIs and decide what makes the most sense to track and stay focused on while executing the overall plan.

There are two types of KPIs: Leading KPIs and Lagging KPIs1. Leading KPIs are indicators that show how you and your team can affect or contribute to improved performance. Lagging KPIs are the results of your Leading KPIs, such as the number of prospects or quotes per week, conversion rate of prospects to customers, customer retention ratio, customer repeat sales, or up sell numbers, etc. Examples of lagging indicators include weekly sales dollars, monthly gross margin, monthly operating income, etc.

Benchmark

Do you know your personal cholesterol number? If so, what does it mean? Just having your cholesterol number from a blood test does not tell you much, unless you know if you are above or below what’s considered a healthy target number or your previous years’ numbers. Then, you and your doctor can determine the most appropriate actions to get that number where it should be to stay healthy. Likewise, KPIs must be benchmarked against your company’s industry, region, etc. Otherwise, how can you track performance without data to show whether you are ahead of or behind the industry curve? If your company doesn’t benchmark regularly, be aware that banks and financial institutions do, which can affect the ability to raise capital when needed.

Economic Outlook

Why is the economic outlook (or forecast) important in corporate number assumptions? Well, the growth rate assumed for sales will be impacted by changes in the economy (unless your company is not impacted in general by the economy). There are several sources that can provide an accurate economic outlook as well as either historical data or forecast data. In general, there are two areas you can leverage:

  • Forecast macro-economic data: When external factors change, knowing macro-economic forecasts will help your company get ahead of the game and avoid getting blind-sided. Keep in mind the industry you are researching. For example, higher education typically goes against the economic cycle. When the economy is down, more people enroll. The auto industry goes with the economic cycle. When the economy is good and interest rates are low, people are more inclined to buy big-ticket items such as automobiles. The Wall Street Journal Economic Forecast Survey is the most popular source of forward-looking macro-economic data. The Wall Street Journal surveys world economists on a regular basis and asks them for predictions. Their website shows predictions three years into the future for GDP and other factors.
  • Historical macro-economic data: For general macro-economic historical data, the Federal Reserve Bank (FRB) is a great place to start. Conduct an online search for the FRB to find national as well as regional and local data. The FRB provides data sets such as Gross Domestic Production (GDP), housing prices, housing starts, Consumer Price Index (CPI) or inflation, unemployment, building permits, vacancy rates, etc. For industry specific data, such as the Industrial Producer Price Index (IP), there is better information on the U.S. Bureau of Labor Statistics site. If your company operates globally, visit World Bank Group, which provides similar sets of data to that of the Federal Reserve Bank.

As your company begins the new year, I hope you will lead the way by leveraging the power of numbers and getting closer to your target numbers. Again, make sure to forecast next year’s numbers in advance. This set of numbers could help your company sustain or increase market shares, as well as cost effectively executing and reaching goals for 2015.

Reference:

1 McChesney, C., Covey, S., & Huling, J. (2012). The 4 Disciplines of Execution: Achieving Your Wildly Important Goals. Free Press.

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About The Author

Chia-Li Chien, CFP®, PMP; Exit Strategist for Women Business Owners at Value Growth Institute in Charlotte, NC. She is the award-winning author of the books: Show Me The Money and Work toward Reward and a faculty member of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. She can be reached at jolly@chialichien.com or 704-268-9378.

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