Measurement: How to Track Your Success
Having the funding request covered, and all the previous steps, again, we have been constructing this story on what your business is all about, how you're going to support it with a robust marketing strategy, how does it work financially. Here is now where we're starting the conversation with your investor, how much you need for them to support you. We move to the measurement section, which is where we think about having a solid measurement plan in order to reduce the perceived risk that your investor will see. What I mean by this is that the measurement section of a business plan is intended to build the confidence of your investor and your ability to measure progress, adjust as needed, and even have a contingency plan should things change. So this section will help you manage risk for yourself as a business, but also will help you and the investor really understanding that you will have a disciplined approach in terms of how you're going to go about carrying out the plan that you're ...
promising. It would include core metrics such as sales, market share, profit, which are the core metrics that we discussed. It could also include several other metrics that are diagnosis of whether you are moving in the right direction. Examples of these is the effectiveness of your marketing efforts, perhaps customer loyalty, customer satisfaction. Again, it will change based on your business, but you should pick additional metrics that can signal the likelihood of you staying on track to deliver the overall goals and brand vision. As I mentioned, this section you can also use it as your own contingency plan where you can manage and adjust through changes. For example, what if you end up in a situation that you sell more than you expect and you run out of supplies to make that product? Or offer that service? How will you manage through that? What happens if you run out of cash to operate that month? That is a very likely scenario that you need to manage through. What are both the potential positive scenarios and the negative scenarios? When you're managing a business, it's always better to have those up front, and have a few strategies and how you plan to manage through those than being surprised. I guarantee that any investor knowing that you actually have a contingency plan, and that you are thinking ahead, and how you would act and adjust as things evolve, specifically if you're building a plan over the years, I would really, really increase the confidence, and even your chances, of that becoming a potential investor. Let's think through the questions in the measurement section. First, what are the most critical metrics to deliver your growth? At a minimum here, you need to include what is the number of sales per month that you expect, or you can talk that in terms of the number of customers. Also, the revenue of customers, you can link it straight to profit. How many people do they need to be buying your product, and repeating your product? This could be core metrics that you track and include in your measurement plan. What is the time horizon and frequency of the review? I really suggest that you break down your overall goals for your business, especially if we're talking year on year, into tangible short-term goals. For examples, monthly sales, or quarterly customer satisfaction rates. So you can measure gradual progress. You don't wait a year to know whether your business in on track. You can't. You will be measuring, in fact, almost daily if you're tracking your sales with that frequency. So that applies to the measurement plan as well. You should be breaking down your overall goals in tangible short-term goals that you can track. How will you act with the data? As we've talked if you have a robust measurement section, it could also serve as your own contingency plan all the way from the reserves that you will have, if you need access to depth, for example, to keep operating if you run into operational challenges. You sell more than expected. How will you manage through all those contingencies is something that you would include. So that is the last official section of your business plan when we talk about measurement.