Setting goals that increase the value of your business

How do you keep your mind focused on increasing the value of your business?

I come across this problem more and more as both and younger and older people are taking that step into a life as an entrepreneur. On the good side the internet has opened a whole world of opportunities for those with an entrepreneurial spirit to leave the corporate jungle and lead a more fulfilling life.

On the downside, there is an enormous amount of information and complexity out there and I see people from all walks of life, including seasoned veterans struggling to cope with it.

The bottom line is that to succeed in business you must have laser beam focus on delivering value and within that framework of value you need to focus on a set of goals.

Value Generation

When I talk about value, I mean this from two angles. Firstly, the customer angle i.e. what is it that my customers are looking for and secondly your own viewpoint i.e. that of the business owner who wants to increase the value of his business.

In this blog I want to focus on the second statement, which is all about you.

The key to running a successful business is by understanding how your business generates value to you as a business owner. In the corporate world they are called Value Chains or Value Streams. To the layman they are high level processes that include the usual suspects of Marketing, Sales, HR, Operations etc.

Focusing on Value using Strategy Maps

If I use a relatively recent example, a business owner told me he wanted to implement a new Payments and Till System that was connected to the Door Entry System. The rationale was that members could gain access the same way they do today but that the “Days and Time on Site” as well as other interesting data such as alcohol purchased could be retained for analysis. It sounded quite interesting until he pointed out his other critical business challenges such as poor cash flow, lower revenues, poor website, staff costs too high, members attendance reducing, poor stock inventories…… the list went on.

We talked for some time about what was truly important to him and after some time that profitability was key. I’m sure you all know that profitability is the difference between your revenues and costs over a given period and so we focused on some goals for these that we thought were reasonable. You’ll see that in the Strategy Map below

And so, once these high-level business goals were locked down, we then talked about all the other things that would have to happen to get the overall results. As you can see above the are several lower level objectives that need to be achieved in order to achieve the overall goal.

The process above is cyclic and you can refine the goals depending on how achievable the objectives are.

The beauty of this approach is its simplicity, it’s ability to help you focus and you can put the lower level objectives into a plan to help track success – example below

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Brian Hill is the principal partner at Rubiks Cube Management services and can be contacted at here

Strategy Maps

Today we are going to discuss the Strategy Map, which is a tool that allows you to understand the multi-tier nature of strategy and its impacts on other parts of the business

Strategy Maps where developed by Kaplan and Norton and set perspective’s for business including:

  • Financial
  • Customer
  • Process and
  • Development (Learning & Growth)

The beauty of this approach is that it allows you to understand the impacts and trade-offs required to implement an optimum strategy. 

Using the example in the Strategy Map tool in our store we start with restating our vision. This allows us to continually check alignment between our goals and our aims.

In this example we start with the main goal being profit. Profit doesn’t always have to be the main goal. There are times when your main goal maybe to increase value, improve quality or increase market share.

So, for this organisation, the overall goal is to generate £100,000 profit in the current forecast year. The business model here isn’t straight forward because this organisation subsidises members benefits by holding events for the public and from leasing out its flats.

So, an overall strategic goal has been broken down into a set of revenue goals and cost management goals. The revenue goals have been agreed across each of its lines of business.

Once these primary goals have been discussed, the next step is to look at the other perspectives. You can start with any other perspective; For this example, we have opted to choose the Customer Perspective next. So, to generate £15k of revenue we have agreed to lease out the flat, to generate £30k we have agreed to improve the attendance of existing members who haven’t visited in a long time and to generate circa £60k we will put on 36 new events.

The next question we ask for each business line is “what customer goals we need to support the financial strategy”. For instance, to generate 10% increased revenue from members we have decided to focus on the 300 members that haven’t attended in the last year and will need a strategy to put on new events to attract them in.

Once we have agreed a customer strategy, we can look at the process perspective. So, to put on new activities for non-attending members, we will first need to complete a survey to see which activities they want and then source the events. The survey is a process which fits under marketing and promotion processes and the sourcing of the activities is a process that fits under the sourcing of products and entertainment processes.

Finally, we look at people and tools / technology. The identification of processes allows us to understand which people are impacted by change and what tools they need to support the strategy. In our example here we need to recruit more staff to support new events and we will need a marketing tool to promote through the channels that will attract the public to the new events.

Feel free to complete our free business model assessment if you want an insight into how you’re managing your business strategy