As an entrepreneur, you have worked hard to get your business off the ground. People measure success in different ways but in business you need to at least be profitable to have a sustainable business for the long run and to obtain bank loans and investors. You should also be able to enjoy the fruits of your labor of love without 80-hour work weeks. So ask yourself the following questions to measure the success of your business.
How Do You Rank Against Your Peers?
There is always someone trying to capture your customers. You need to be aware of what is going on in your industry and competitors to ensure that you are providing the best product or service offering to your customers. This can be achieved by periodically determining how you measure up against the industry and competitors in the areas of market share, revenue growth, customer growth and share of advertising voice. Share of advertising voice can be through website traffic, pay-per-click advertising, newspapers ads and other types of advertising.
Are You Able to Pay Your Bills?
This should be a simple calculation if you have the right systems and processes in place. You should not have to wait on your external accountant to determine profitability. You need to have something in place that you can gauge quickly how you are doing financially so that you can quickly make adjustments if needed.
If you are not profitable or are not hitting your profitability goals, then you should (1) review operations and make them more efficient, (2) review expenses and eliminate unnecessary ones or find less expensive alternatives such as insurance and (3) develop new revenue sources or increase number of customers through strategic marketing efforts.
Are You Able to Comfortably Pay Yourself?
There are many reasons why you became an entrepreneur. Maybe one reason was to maintain or better your lifestyle. You should be able to comfortably pay yourself from the proceeds of the business. If you are struggling to pay yourself, then you need to execute some of the recommendations in the previous section to increase revenue and lower expenses.
Are You Still Happy Being an Entrepreneur?
Given the long hours and stress of owning your own business, you need to do a gut check and make sure you still love what you are doing. You need to make sure the effort is worth it. If everyday you hate what you are doing, it is time to make a change.
There are many other measure of success, but this will get you started on measuring the profitably of your business, personally and financially so that you can either grow your business or exit. Whatever you choose, make sure it is the right decision for you.
If you cannot easily answer these questions, you may need a part-time CFO on a project basis to help you measure your profitability and put the right accounting system in place. These are things you should be able to answer. Loftis Consulting, a Chicago-based boutique firm, offers these services to start-ups and small to mid-size businesses to help them get to and surpass their profitability goals.
