Measure performance and set targets

Once your business is established and financially secure, you need to think about how to grow or improve it.

Regularly reviewing your progress will give you an idea of how you can benefit in your current market, access new customers and find new business opportunities. However, it is important that you understand how to correctly review and assess your performance to make the most out of the information available to you.

A performance measurement system is an important way of keeping track of your business’ progress. This should give you reliable information about business performance and allow you to set targets for implementing your growth strategies. You will should update your business plan with your new strategy and make sure you introduce the developments you have noted.

This guide sets out the business benefits of performance measurement and target-setting. It shows you how to choose which key performance indicators (KPIs) to measure and suggests examples in a number of key business areas. It also highlights the main points to bear in mind when setting targets for your business.

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The importance of reviewing business progress and target-setting

Measuring your business performance and setting targets are important processes for helping your business to grow. Many small businesses can run themselves quite comfortably without much formal measurement or target-setting, but growing businesses need to control these processes.

It can greatly benefit your business if you think about long-term proposals and strategically plan for these, particularly if you want to take on more staff, create departments within the business, or appoint managers or directors.

Strategic business reviews are useful if:

• you are uncertain about how well your business is performing
• you want to know how to get the most out of your business or market opportunities
• your business plan is out of date – eg you haven’t updated it since you started trading
• your business is moving in a direction different to the one you had planned
• the business is becoming difficult or unresponsive to market demands

The benefits of performance measurement

Knowing how the different areas of your business are performing can help you to assess where your business is strong, where it is weaker and factors you can change for the better. This should help you to manage your performance proactively and efficiently.

However, you need to make sure that you measure the correct areas of your business so you get the correct information. You should focus on specific factors that are easy to measure and show the areas where your business is successful when compared to the rest of the market. These are known as key performance indicators (KPIs). For more information on KPIs, see the page in this guide on deciding which key performance indicators to measure.

You should measure non-financial targets as well as considering financial ones. Some others areas you could consider are:

• your customers – eg how many you have, how often they use you and how many customers you have lost or gained
• customer service – eg waiting times for assistance, complaints, or reasons customers have complained
• market share – eg whether your share of the market increased or decreased against competitors
• your staff – eg satisfaction levels, work quality or attendance records

The benefits of target-setting

Once you have identified your KPIs and found the best way to measure them, you should then start to set performance targets. This will give everyone in your business an idea of the targets they need to aim for, individually and collectively.

Your strategic visions can sometimes be difficult to communicate, but you can break your main objectives down into smaller targets to make it easier to manage. By doing this, your smaller targets become more like day-to-day operations which, once completed, move you closer to your final goal.

Setting the direction

By creating a clear business strategy, you should be able to answer any concerns and have an idea of how to move forward and hit your targets.

Consider asking questions such as:

• What’s my direction? You should look at where you are now, where you want to go over the next three to five years and how you intend to get there.
• What are my markets – now and in the future? Which markets should you compete in, how will they change and what does the business need in order to be involved in these sectors?
• How do I gain market advantage? How can the business perform better than the competition in your chosen markets?
• What resources do I require to succeed? What skills, assets, finance, relationships, technical competence and facilities do you need to compete? Have these changed since you started?
• What business environment am I competing in? What external factors may affect the business’ ability to compete?
• How am I measuring success? Remember, measures of performance may change as your business matures.

It’s doubtful whether you will be able to answer these questions on your own – involving your professional advisers, your fellow directors and your senior staff will all help to make your review more effective.

The Investors in People Interactive tool

Investors in People (IIP) Interactive is a free business improvement tool that you can use to assess your business’ performance. The tool also gives you advice on how to use the results to improve your business processes and performance.

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Deciding which key performance indicators to measure

To successfully measure the performance of your business, you need to ensure that you identify and focus on the correct areas of your business.  It is a good idea to find the areas which make your business successful and then decide how best to measure performance in those areas.

This will vary from sector to sector and business to business. Put some time into developing a strategic awareness of what it is that drives success for your business. See our guide to strategic planning.

Make sure you find the correct measurements for the areas you want to assess. For example, a manufacturer that produces and sells low-cost goods in high volumes might focus on production line speed. Alternatively, another manufacturer that produces smaller quantities but uses high-cost components might focus instead on reducing production line errors.

Assess your core activities

A good starting point for your business performance review is to evaluate what you actually do – your core activities, the products that you make, or services that you provide. Think about what makes them successful, how they could be improved and whether you could launch new or complementary products or services.

For example, some of the things you could consider might be:

• How effectively are you matching your goods and services to your customers’ needs? If you’re not quite sure what those needs are, you could carry out further market or customer analysis. See the page in this guide on measurement and your customers.
• Which of your products and services are succeeding? Which aren’t performing as planned? Decide which products and services offer both a high percentage of sales and high profit margins. Use this information to make product improvements, or to drop poorly performing products or services if you can.
• What’s really behind the problems of a product or service? Consider areas such as pricing, marketing, sales and after-sales service, design, packaging and systems during your business performance review. Look for ‘quick wins’ that give you the breathing space to make more fundamental improvements.
• Are you conducting frequent financial management reviews? Are you keeping a close enough eye on your direct costs, your overheads and your assets? Are there different ways of doing things or new materials you could use that would lower your costs? Consider ways in which you can negotiate better deals with your suppliers. See our guide on how to negotiate the right deal with suppliers.

Answering these questions will give you the basis on which to improve performance and profitability.

Finding your specific measures

Once you have identified your key performance indicators (KPIs), you need to find the best way of measuring them. You should focus on the areas and elements of your business performance that make you successful or profitable.

For example, you may decide that customer service is a strategic priority for your business and start measuring this. But there are many ways of doing so. You might consider measuring:

• the proportion of sales accounted for by returning customers
• the number of customer complaints received
• the number of returned items
• the time it takes to fulfil an order
• the percentage of incoming calls answered within 30 seconds

None of these is necessarily better than any other. The challenge is to find which specific measure – or measures – will enable you to improve your business.

This type of measurement unit is often referred to as a KPI. A typical KPI has two attributes – it is usually expressed as a number, and it captures a key driver of the business.

Some businesses also use colour-coded systems of measurement, such as traffic lights – red signifying a problem, green that all is fine – as alternative approaches.

To find out how to assess your KPIs, download a KPI definition template [opens in a new window].

See the page in this guide on choosing and using key performance indicators.

Using standardised measures

There are standardised performance measures that have been created which almost any business can use. Examples include balanced scorecards and industry dashboards. See our guide on quality management standards.

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Choosing and using key performance indicators

Selecting the right key performance indicators (KPIs) and using them effectively will help improve your business’ performance.

Selecting KPIs

There are a few things to consider when selecting key criteria that your KPIs should meet:

• They should be as closely linked as possible to the top-level goals for your business. See the page in this guide on deciding which key performance indicators to measure.
• Your KPIs should relate to aspects of the business environment over which you have some control. For example, interest rates may be a crucial determinant of performance for a given business, but you can’t use the Bank of England base rate as a KPI because businesses have no power to change it. By contrast, a business’ exposure to fluctuations in interest rates can be controlled and so this might make a useful KPI.

Getting the most from your KPIs

The purpose of performance measurement is ultimately to drive future improvements in performance. There are two main ways you can use KPIs to achieve this kind of management power.

The first is to use your KPIs to spot potential problems or opportunities. Remember, your KPIs indicate trends in your business performance. If the trends are moving in the wrong direction, you know you have problems to solve. Similarly, if the trends move consistently in your favour, you may have greater scope for growth than you had previously forecast.

To find out how to assess your KPIs, download a KPI definition template [opens in a new window].

The second is to use your KPIs to set targets for departments and employees throughout your business that will deliver your strategic goals. For more information about using target-setting to implement your strategic plans, see the page in this guide on how to use your review to set useful targets for your business.

Managing your information

As with most areas of your business operations, the more detailed and well structured the information you keep about your KPIs is, the easier it will be to use as a management tool. Computer-based management information systems are available for this purpose.

Assessing other areas of business efficiency

You should also consider the various aspects of your business in turn, as part of a business review.

Premises

• What are your long-term commitments to the property?
• What are the advantages and disadvantages of your current location?
• Do you have room to grow, or the flexibility to cut back if necessary?
• If you move premises, what will be the cost? Will there be long-term cost savings and improvements in efficiency?

See our guides on renting business premises and buying business premises.

Facilities

• If you manufacture products, how modern is your equipment?
• What is the capacity of your current facility compared with existing and forecast demand?
• How will you fund any improvements?
• How do you compare with your competition?

Information technology

• What management information and other IT systems do you have in place?
• Will these systems cater for any proposed expansion?
• Will they really make a difference to the quality of product or service your business provides? If they don’t, can you change them to make sure they do?
• Do you make best use of technology such as wireless networking and mobile telephony to allow for more flexible working?

People and skills

• Do you have the right people to achieve your objectives?
• Do they know what is expected of them?
• Do you operate a training and development plan?
• Do you pay as well as the competition?
• Do you suffer from high staff turnover? Are staff motivated and satisfied?

Professional skills

• Do you have the right management team in place for growth?
• Do you have the skills available that you need in areas such as human resources, sales and IT?
• Do your staff need new or improved skills or to be retrained?

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Measurement of your financial performance

Getting on top of financial measures of your performance is an important part of running a growing business, especially in the current economic climate. Many businesses fail because of poor financial management or planning.

Your business success can depend on developing and implementing sound financial and management systems. Updating your original business plan is a good place to start. See our guides on how to prepare a business plan for growth and balance sheets: the basics.

A review of your financial performance can help you reassess your business goals and plan effectively for improving the business. When conducting a financial review of your business, you might want to consider the following:

• Cashflow – this is the balance of all of the money flowing in and out of your business. You should ensure that your forecast is regularly reviewed and updated. For more information, see our guide on cashflow management: the basics.
• Working capital – have your requirements changed? If so, research the reasons for this movement and assess how this compares to the industry standard. If necessary, take steps to source additional capital – see our guide on how to use your business plan to get funding.
• Cost base – keep your costs under constant review. Make sure that your costs are covered in your sale price – but don’t expect your customers to pay for any business inefficiencies. For more information, see our guide on how to price your product or service.
• Borrowing – what is the position of any overdrafts or loans? Are there more appropriate or cheaper forms of finance you could use?
• Growth – do you have plans in place to adapt your financing to accommodate your business’ changing needs and growth?

Measuring your profitability

One of the most important areas of your finances you should review is your profitability. Most growing businesses ultimately target increased profits, so it’s important to know how to measure profitability. The key standard measures are:

• Gross profit margin – how much money is made after direct costs of sales have been taken into account, or the contribution as it is also known.
• Operating margin – this lies between the gross and net measures of profitability. Overheads are taken into account, but interest and tax payments are not. For this reason, it is also known as the EBIT (earnings before interest and taxes) margin.
• Net profit margin – this is a much narrower measure of profits, as it takes all costs into account, not just direct ones. All overheads, as well as interest and tax payments, are included in the profit calculation.
• Return on capital employed – this calculates net profit as a percentage of the total capital employed in a business. This allows you to see how well the money invested in your business is performing compared with other investments you could make with it, like putting it in the bank.

Other key accounting ratios

There are a number of other commonly used accounting ratios that provide useful measures of business performance. These include:

• liquidity ratios, which tell you about your ability to meet your short-term financial obligations
• efficiency ratios, which tell you how well you are using your business assets
• financial leverage or gearing ratios, which tell you how sustainable your exposure to long-term debt is

For more information, and for examples of specific accounting ratios, see our guide on balance sheets: the basics.

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Measurement and your customers

Finding and retaining customers is a crucial task for every business. So when looking for areas of your business to start measuring and analysing, it’s worth asking yourself if you know as much as possible about your customers.

When you started your business, you probably devised a marketing plan as part of your overall business plan. This would have defined the market you intended to sell in and targeted the nature and geographical distribution of your customers.

When reviewing your business’ performance, you’ll need to assess your customer base and market positioning as a key part of the process. You should update your marketing plan at least as often as your business plan.

Revisiting your markets

A strategic business review offers you the opportunity to stand back from the activity outlined in your plan and look again at factors such as:

• changes in your market
• new and emerging services
• changes in your customers’ needs
• external factors such as the economy, imports and new technology
• changes in competitive activity

Looking at your business from your customers’ perspective can help you avoid getting sidetracked as you consider your options for growth.

Customer feedback is essential – the more you know about what your customers think and want, the easier it will be to handle increased numbers of customers. Look for as many ways of capturing this information as possible, including:

• sales data – what your customers choose to buy (or not to buy) provides the clearest indication of their preferences
• complaints – but remember that many customers will simply switch suppliers before making a complaint
• questionnaires and comment cards – a very useful source of information, so consider using incentives to encourage more customers to complete them
• mystery shopping – having someone pose as a customer for research purposes can give a very clear sense of how well you are performing

You can download a customer service evaluation example [opens in a new window].

Asking customers for feedback helps to identify where improvements can be made to your products or services, your staffing levels or your business procedures. See our guides on how to manage your customer care and know your customers’ needs.

Business performance reviews of this kind can be very effective – they can give your business the flexibility it needs to beat off stiff competition at short notice – but it is important to think through the implications of any changes. In the new phase of your business you’ll need to plan your finances and resourcing carefully at all times.

You can download a guide on reviewing and growing your business from the Chartered Institute of Marketing [opens in a new window].

Manage customer information and relationships

Customer relationship management (CRM) software can be a powerful tool for capturing and analysing information about your customers and the products and services they purchase.

CRM also enables you to push up service levels by ensuring that all customer-facing staff have ready access to each customer’s history. See our guide on customer relationship management. 

Widen your focus beyond current customers

Selling more to existing customers might be the easiest way of increasing sales, but most businesses aiming for significant growth will need to find ways of reaching new groups of customers.

So knowing more about sections of the market you haven’t yet tapped is crucial. See our guides to market research and market reports and how to increase your market share.

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Measurement and your employees

As your business grows, the number of people you employ is likely to increase. To keep on top of how your staff are doing, you may need to find more formal ways of measuring their performance.

Measuring through meetings and appraisals

Informal meetings and more formal appraisals provide a very practical and direct way of monitoring and encouraging the progress of individual employees.

They allow frank exchanges of views by both sides and they can also be used to drive up productivity and performance through setting employee targets and measuring progress towards achieving them.

You should consider annual employee appraisals to monitor how an employee is developing and to get feedback on their opinions of the business. You can download a sample appraisal form from Shaw Trust [opens in a new window].

Regular staff meetings can also be a very useful way of keeping tabs on wider developments across your business. These meetings often give an early indicator of important concerns or developments that might otherwise take some time to come to the attention of your management team.

Quantitative measurement of employee performance

Looking at employee performance from a financial perspective can be a very valuable management tool. At the level of reporting for the overall business, the most commonly-used measures are sales per employee, contribution per employee and profit per employee.

These measures shouldn’t be thought of as an alternative to the broader appraisals outlined above, but can flag up issues that might later be explored in more detail in those meetings.

Expressing employee performance quantitatively is easier for some sectors and for some types of worker. For example, it should be quite easy to see what kind of sales an individual sales person has generated, or how many units manufacturing employees produce per hour at work.

But with a bit more effort, these kinds of measures can be applied in almost any business or sector. For example, using timesheets to assess how many hours an employee devotes each month to different projects or customers under their responsibility gives you a way of assessing what the most profitable use of their time is.

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Measurement against other businesses – benchmarking

Benchmarking is a valuable way of improving your understanding of your business performance and potential by making comparisons with other businesses.

Who to benchmark against

It is usually helpful to compare yourself against businesses in the same sector. However, your market position and your objectives, among other things, will affect the specific comparisons you want to make.

For example, a small business in a crowded sector may want to benchmark itself against average performance levels in the sector, but a business targeting rapid and significant growth may choose comparisons with an established market leader.

You can also benchmark internally within your business. For example, comparing absenteeism rates between departments may enable you to spread good working practices from the best-performing areas of your business.

What to benchmark

In general, the same rule applies to benchmarking as to choosing which performance measures to use. You should focus on those areas that drive business success in your sector – your key drivers.

How to benchmark

You should have ready access to all the figures for your own business, so the main challenge with benchmarking is often the process of finding external data for your comparisons.

There are a number of sources for this kind of information:

• your trade association is a useful starting point, as these organisations often collate sector-wide statistics
• commercial market reports may provide greater detail, although these can be costly

Using your benchmarking data

Benchmarking data should be used in the same way as any other performance measurement data you generate – to drive improvement in the way your business operates.

Typically this will involve setting targets to help you reach the benchmark values to which you aspire. For more information on target-setting, see the page in this guide on how to use your review to set useful targets for your business.

To understand how to benchmark using the HR absenteeism rate, download an absenteeism benchmarking example [opens in a new window].

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Measurement against other businesses – competitor analysis

When you have been running your business for a while, you will probably have a clearer idea of your competitors than you had when you first started. Conducting market research and competitor assessments to gather more information may cost time, money and effort, but there are many benefits to knowing more about what your competition is doing.

What you need to know

The type of competitor information that will be really useful to you depends on the type of business you are and the market you’re operating in. Questions to ask about your competitors include:

• who they are
• what they offer
• how they price their products
• what the profile and numbers of their customers are compared with yours
• what their competitive advantages and disadvantages are compared with yours
• what their reaction to your entry into the market or any product or price changes might be

You will probably find it useful to do a strengths, weaknesses, opportunities and threats (SWOT) analysis. This will show you how you are doing in relation to the market in general and specifically your closest competitors. See the page in this guide on models for your strategic analysis.

You can also see our SWOT analysis example.

How to find out more

There are three main ways to find out more about your competitors:

• What they say about themselves – sales literature, advertisements, press releases, shared suppliers, exhibitions, websites, competitor visits, company accounts.
• What other people say about them – your sales people, customers, local directories, the internet, newspapers, analysts’ reports, market research companies.
• Commissioned market research – if you need more detailed information, you might want to commission specific market research via an organisation such as the Market Research Society (MRS). Find out about market research on the MRS website [opens in a new window] and see our guide on market research and market reports.

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Use your review to set useful targets for your business

Once you have fully measured your business performance, you need to use the research you have gathered to increase your performance levels. The best way to do this is to set performance targets in the key areas of your business that you have discovered.

Key performance indicators (KPIs), targets and business strategy

Setting performance targets can help you deliver the strategic changes that many growing businesses need to make. The top-level objectives of your strategic plan can be implemented through departmental goals, and setting targets based on KPIs is an ideal way of doing this.

For example, a company seeking to expand on the basis of its product design capabilities might target year-on-year increases in the number of patents it secures, new product launches, or licensing income. The specifics will depend on which KPIs best capture the dynamics in the market.

Setting SMART targets

Your targets should be SMART – specific, measurable, achievable, realistic and time-bound:

• Using KPIs ensures your targets will meet the first two criteria, as all KPIs should, by definition, be specific and measurable. For more information about KPIs, see the page in this guide on choosing and using key performance indicators.
• Achievable – you need to set ambitious targets that will motivate and inspire your employees. Look back at your recent performance to get a sense of what is feasible.
• Realistic – setting realistic targets means being fair on the people who will have to reach them. Make sure you only ask for performance improvements in areas that your staff can actually influence.
• Time-bound – people’s progress towards a goal will be more rapid if they have a clear sense of the deadlines against which their progress will be assessed.

Assigning responsibility and resources

Once you have identified the targets you believe will deliver the strategic growth you’re aiming for, assign clear responsibility for delivering each of them.

It is fine for your top-level strategic objectives to be abstract and business-wide, but your KPI targets should be concrete and clearly owned by a department or individual.

Hitting your targets is unlikely to be a cost-free process, so be ready to make the necessary resources available when needed. Also, undertake regular reviews to assist with motivation and to make changes if the progress made isn’t as expected.

Using your review to set your business goals

One you have obtained adequate research into your business, you should reconsider the following questions:

• Where is the business now?
• Where is it going?
• How is it going to get there?

These questions should help you to refocus your goals and plan how you are going to reach them. At the end of any review process it’s vital that work plans are prepared to put the new ideas into place and that a timetable is set.

Regularly reviewing how the new plan is working and allowing for any teething problems or necessary adjustments is important too. Today’s business environment is exceptionally dynamic and it is likely that you will need regular reviews, updates and revisions to your business plan in order to maintain business success.

To find out more about deciding the right direction for your business see our guide on how to assess your options for growth.

Continuous improvement

In addition, a simple planning cycle can greatly enhance your ability to make changes in your business routine if necessary. Good planning helps you anticipate problems and adapt to change more easily. To read more about the planning cycle see our guide on how to prepare a business plan for growth.

Expert input

You may find at this stage in your business’ development that you need external skills to help you with the changes you have to make. In this case you might consider:

• employing skilled consultants in areas where you cannot afford to develop in-house skills
• appointing an experienced non-executive director who can provide a regular, impartial assessment of what you are doing
• using a management consultant to help you identify how you can strengthen or change your management structure to grow the business

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Models for your strategic analysis

There are a number of useful business analysis models that may help you think more strategically about your business.

Strengths, weaknesses, opportunities and threats (SWOT) analysis

The SWOT analysis is one of the most popular strategic analysis models. This involves looking at the strengths and weaknesses of your business’ capabilities, and any opportunities and threats to your business.

Once you have identified all of these, you can assess how to capitalise on your strengths, minimise the effects of your weaknesses, make the most of any opportunities and reduce the impact of any threats.

Opportunities and threats in the external environment

It’s important to remember that opportunities can also be threats – for example, new markets could be dominated by competitors, undermining your position. Equally, threats can also be opportunities – for example, a competitor growing quickly and opening a new market for your product or service could mean that your market expands too.

A SWOT analysis can provide a clear basis for examining your business performance and prospects. It can be used as part of a regular review process or in preparation for raising finance or bringing in consultants for a review.

Once you have collected information on your organisation’s internal strengths and weaknesses, and external opportunities and threats, enter this data into a simple table.

	Positive	Negative
Internal	Strengths	Weaknesses
External	Opportunities	Threats

See our SWOT analysis example.

Other strategic analysis tools

• Political, Economic, Social, Technological, Legal and Environmental (PESTLE) analysis – a technique for understanding the various external influences on a business. Find out about the PESTLE analysis model on the RapidBI website [opens in a new window] and see our PESTLE analysis example.
• Scenario planning – a technique that builds various plausible views of possible futures for a business. Find out about the scenario-planning model on the Value Based Management website [opens in a new window].
• Critical success factor analysis – a technique to identify the areas in which a business must succeed in order to achieve its objectives.
• The five forces – the theory that there are five defined factors that influence the development of markets and businesses – potential entrants, existing competitors, buyers, suppliers and alternative products/services. Using this model you build a strategy to keep ahead of these influences. For more information, see our Five Forces Business Model example.

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CASE STUDY

Here’s how KPIs help me achieve my business goals

Established in 1987, Lucy Bristow Appointments is an award-winning business recruitment company with two offices in Bristol. Operations director, Wendy Trevett, describes how setting business targets has boosted new business and helped the company adapt to changing market conditions.

What I did

Define objectives

“Three years ago a strategic review showed that while our staff were skilled and service levels were high, our market position was threatened by large organisations undercutting our prices. Levels of repeat business were dropping and price reductions weren’t an option. Staff surveys also revealed motivational issues and a lack of direction.

“It was evident that our business goals needed to shift. We adapted our business plan to increase the emphasis on new business generation and customer retention. Setting targets for key performance indicators (KPIs) was the way forward.”

Set targets

“Following management consultation, we set new monthly customer targets for each consultant, as well as targets for volume of repeat business.

“In addition, we set realistic weekly KPI targets for sales consultants. These included making 25 sales calls to prospective clients, meeting two clients face-to-face and having six candidates booked in for client interviews.

“In our industry, new and repeat business depends on having a wide pool of quality candidates, so we also set targets for consultants to interview five new jobseekers every week.

“The targets were discussed with staff before implementation. This was essential to help them understand the underlying business goals. It also gave them a chance to ask questions and express concerns.”

Monitor performance

“As well as formal monthly one-to-one meetings, we have a weekly desk-side chat with each employee to discuss the previous week’s performance against monthly targets and to set ‘mini objectives’ for the coming week. This helps us spot problems early and nip them in the bud, as well as keeping motivation levels up.

“Every six weeks we have a company meeting to talk through our financial performance. It’s important that people view their own performance as part of the bigger picture and see how meeting targets impacts on the bottom line.

“Overall, KPI targets have been very effective for us. New business has increased, customer retention has improved and staff report that they feel more focussed and involved.”

What I’d do differently

Establish weekly monitoring sooner

“We started off thinking monthly monitoring was sufficient, but soon found leaving it for this period of time made it harder to tackle underperformance and left staff feeling neglected. In retrospect, we should have introduced weekly meetings a lot earlier.”

Give staff ownership

“When we started setting targets, management tended to take responsibility for ensuring they were met. We now encourage employees to take ownership by asking them for ideas and discussing options rather than handing out instructions.”

Read more case studies that describe first hand how people tackle real-life challenges and opportunities.

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CASE STUDY

Here’s how a SWOT analysis improved my business

Planning for growth

Chartwell Financial Services Ltd, part of the Lindley Group Ltd, is an independent financial services consultancy specialising in corporate pensions and investment. The company was bought by a new management team in 2002 and has since gone from strength to strength. From the start, the team adopted a methodical approach to planning which included a detailed strengths, weaknesses, opportunities and threats (SWOT) analysis. Director Richard Clarke explains how the analysis has influenced the ongoing growth of the company.

What I did

Analyse everything

“We conducted our first SWOT analysis as part of our business plan when we were buying the company. We needed to know exactly what we were taking on and how it could be improved. The SWOT analysis covered every aspect of the business. It included finance, skill levels, client base, service delivery, market conditions, competitor activity and regulatory issues.

“Thinking about how we were going to tackle each point raised provided a firm footing on which to build our strategy. In many instances, we found that a threat could also be a strength or an opportunity. For example, the fact that the pensions industry is undergoing a major legislative overhaul is a threat to our business. But it’s also an opportunity because our experience and industry knowledge put us in a strong position to help clients negotiate any changes.”

Repeat the exercise

“SWOT analysis provides a snapshot of the business position at a specific point in time. Strengths, weaknesses, opportunities and threats change with the market and with the growth of the business. We did three sets of analysis in our first year as owners. Each one exposed new issues to think about and helped to modify our business plan. SWOT analysis has been a useful tool for reviewing our whole operation and improving performance accordingly.”

Set a timescale

“When we’d completed each SWOT analysis and made a plan, we put dates alongside each action point. This provided a focus and meant we weren’t just paying lip service to the analysis. There was no point having it if it didn’t act as a vehicle for change. We didn’t always meet the timescale specified, but working to a defined schedule kept things moving in the right direction.”

What I’d do differently

Review more often

“The SWOT analysis could have been reviewed more often. When we did our second analysis, we’d addressed about 70 per cent of what we’d set out in the first analysis. An ongoing review, say once a month, could have helped us get up to speed on the other 30 per cent sooner.”

Divide responsibility

“We should have split responsibilities more clearly from the outset. In the early days, there were instances where action should have been taken as a result of the SWOT analysis but everyone thought ‘someone else’ was doing it.”

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