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Measure it, manage it – business milestones to success

Michelle McVeigh • Jan 23, 2024

“If you can measure it, you can manage it.”  – Robert Kaplan

Running a healthy small business is no mean feat, and business owners have certainly had some challenges thrown at them over the past few years.

However, small businesses are renown for being agile, resilient, and proactive. If you are working hard to achieve the success you aspire to, now might be a good time to have a think about what success means to you and how you can measure it.

After all, how can you achieve your goals if you don’t have a clear idea of what success looks like and a way to measure how your business is performing in relation to achieving your business goals?

How do you define success?

Success can be something that’s very hard to quantify and your definition of what makes a successful business will generally be quite different to someone else’s. Every small business owner will have their own individual idea of what success means to them based on their values and objectives for the business.

Common measures of success

Surprisingly, while financial measures are most commonly used to measure business success, business owners often look to ‘softer’ measures, which often relate back to why they went into business in the first place. Many small business owners are motivated strongly by the desire to provide quality goods and/or services and running a business that is a good place to work – both for the owner and the employees.

This is reflected in a report conducted by National Australia Bank which found that only 11 per cent of participants ranked large turnover as a measure of success. i  One in 3 (32%) rated high profits as an important measure but this was well behind other things such as good financial management (58%), positive word of mouth (56%), productive staff (49%) and happy staff (45%).

Crunching the numbers

That’s not to say that tracking the financial health of your business is not important. Clearly, it’s critical, and there are many metrics that can be used to determine what financial shape your company is in.

The most common measure to track how your business is tracking financially is profitability. While it’s possible for companies to survive for a time without being profitable, operating on the goodwill of creditors and investors, to prosper, a company must eventually attain and maintain profitability. It’s a good measure of how successful your company is.

It’s important to acknowledge that no single metric will provide you with the full picture of your company’s financial and health. There are many financial metrics you can use to track your businesses’ health and progress. Metrics you may wish to look at are liquidity which measures a firm’s ability to ride out short-term difficult patches, and solvency which informs how readily longer-term debt can be supported. Companies can have high debt but still perform well if they have used their debt to purchase assets such as equipment or other companies so calculating your debt compared to your assets can be of benefit.

Coming back to your, unique goals

Given that there are so many aspects of business success you can monitor, it comes back to how you define success. That means working out what you want to achieve, what business success means to you and then coming up with the financial and nonfinancial drivers of that objective.

The next step once you have come up with your drivers is to determine how best to assess these. For example, if one of your main objectives is customers who are pleased with your products or services, customer satisfaction surveys will be a good tool to determine how you are tracking and where there is room for improvement. Or if your focus is on improving your turnover, you can look at measures to track your sales volumes, lead conversions and other matrix that support revenue.

You must also regularly re-evaluate your metrics, as well as your business goals as these change over time.

Whatever you want to achieve in your business we wish you a successful 2024.

What does the Federal Budget mean for me?

By Oliver Holcombe • 14 May, 2024
Treasurer Jim Chalmers has high hopes that his 2024 Federal Budget will rein in inflation earlier than expected, ease cost-of-living pressures and build a stronger economy in the future.

Federal Budget 2024-25: Tax Implications

By Ryan Troe • 14 May, 2024
Major tax cuts were the centrepiece of the Albanese government’s third Federal Budget, even though the changes have already been announced and legislated. Small businesses can breathe a sigh of relief, with the popular $20,000 instant asset write-off hanging on for another year and a valuable bill rebate on the way to help with the burden of high energy bills. Tax cuts for everyone From 1 July 2024, all 13.6 million Australian taxpayers will receive a tax cut, with the average taxpayer’s tax bill being $1,888 (or $36 a week) lower. Under the new rules, the lowest tax rate reduces from 19 per cent to 16 per cent, with the 32.5 per cent marginal tax rate reducing to 30 per cent for individuals earning between $45,001 and $135,000. The current 37 per cent marginal tax rate will be retained for people earning between $135,001 and $190,000, while the existing 45 per cent rate now applies to income earners with taxable incomes exceeding $190,000. Low-income earners (under $45,000 p.a.) are the biggest winners from the changes. A single taxpayer with a taxable income of $40,000 who pays $4,367 in tax in 2023 24, would have received no benefit from the original Stage 3 tax plan, but now receives a tax cut of $654. Boost for tax compliance On the revenue side, the Budget includes savings of $2.5 billion in tax receipt measures through a crackdown on the shadow economy, fraud, and tax avoidance. Taxpayers can expect the ATO to continue its recent tougher stance, with technology upgrades to enable better identification and blocking of suspicious activities in real-time and a new compliance taskforce focussed on recovering lost revenue and stopping fraudulent refunds. Foreign residents will pay an additional $600 million over the next three years due to strengthening of the capital gains tax rules applying to this group. Law change for old tax debts However, one controversial measure, labelled ‘robotax’ by the media, may be abandoned, according to the Budget papers. The ATO had been calling in historical tax debts, some accrued more than a decade ago, saying it had no choice under current laws. But the government now intends to change the tax law to give the ATO discretion about whether to collect the individual, small business, and not-for-profit debts. Instant asset write-off retained The deadline for the $20,000 instant asset write-off will be extended to 30 June 2025, allowing small businesses with annual turnovers of less than $10 million to immediately deduct eligible assets. In addition, $23.3 million will be spent boosting adoption of eInvoicing to help improve small business’ cash flow and productivity. Relieving energy bill pressure Direct relief for small business energy bills will come in the form of a $325 rebate, while there will also be new funding for reforms to help businesses find their best electricity contract. Assistance for smaller entities With trading conditions remaining difficult, small business will receive $641.4 million in new targeted support. This includes $10.8 million to extend both the NewAccess for Small Business Owners program providing free mental health support and the free phone-based Small Business Debt Helpline. An additional $25.3 million will be provided to expand the Payment Times Reporting Regulator and help improve payment times. Nuisance tariffs abolished From 1 July 2024, 457 nuisance tariffs will be abolished by the government to cut business compliance costs. New funding to expand the government’s Digital ID system is designed to lower the administration burden for small businesses storing identification data on their customers and employees. Anti-money laundering crackdown The Budget includes $168 million over four years to pay for reforms to Australia’s anti-money laundering and counter-terrorism financing regime. Tighter rules are expected to result in lawyers, accountants and real estate agents being required to undertake due diligence on their customers and report any suspicious activities. Information in this article has been sourced from the Budget Speech 2024-25 and Federal Budget Support documents. It is important to note that the policies outlined in this article are yet to be passed as legislation and therefore may be subject to change.
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