To find purpose and direction in your life and your business is to know where you’re going. Managing is about knowing your intended destination.
However, you may wonder whether you are heading in the hoped-for direction. To understand whether you are going in the right direction you need to take some measurements.
You need to measure notionally the trajectory on which you are heading and the difference between it and your intended direction.
For instance, you may wish to set a target for turnover. You therefore need to measure turnover over time, to track its change, to understand why it is changing and the overall trend towards your desired objective.
If you find that you are not on the right trajectory you will need to act. But first, you may need to fully understand what your current trajectory is and the difference with where you really want to be going. The action then takes you back onto the desired course.
This is a permanent process. You need to be looking constantly at where you are going and where your actions are taking you. This standing back from your own situation is essential. It is part of having multiple thinking hats, multiple roles and responsibilities even, and especially if you are self-employed.
Having a purpose
Knowing where you’re going is about having purpose and direction. If you are a painter and decorator your essential purpose is to paint and decorate. But there may be additional questions. What are you going to paint and decorate? People’s houses? Business premises? This type of choice will affect your actions.
If you choose to paint people’s houses you would be wise to advertise accordingly or paint to your van. If you choose to paint business premises you may wish to advertise in a business publication or newspaper.
Measuring your trajectory
In reality, you may find that you have a mix of customers. If your objective is to paint people’s houses you would need to distinguish private customers from business customers. Then you would measure turnover or numbers of customers you had in each category and adjust accordingly.
If you maintain your objective to primarily paint people’s houses then you might want to increase advertising that will touch private customers. This corrective action is the central theme of management. Acting to change your situation and bring you onto the desired path.
It may be that you are simply steering away from an undesired path. If for instance, the measurement of your turnover shows you that it is decreasing, you need to determine actions which will increase it and bring you back onto a trajectory leading to higher turnover. In practice this may be increasing prices, working additional hours or finding better-paid work.
How then can you use software to measure? The simplest approach is to create a table which shows you trends over time. The simplest is turnover against time, so a table of turnover by week or month.
There may be related factors such as the number of orders, which you might plot turnover per month. The objective would be to see whether your turnover is lower if you have fewer orders. Your turnover may not necessarily be lower just because you have fewer orders. You may find your turnover increasing because each order has a higher average value.
So more useful measure might be average order value over time. Plotting turnover, average order value against time may show you that your turnover is increasing even with a constant number of orders. You only have a limited number of hours in the week and increasing your average order value is generally a good thing to do.
The essential thing to know, in this case, is the average order value and whether it is going up or down, whether you are making more or less money and how many hours you working. Measuring these things will enable you to improve. Especially if you know why things are going the way they are.
Why are average order values going up? Are you finding better customers in better areas? Are prices generally going up? Have you done something good which now enables you to find better customers?
Purpose and direction
Awareness is the key. Aware of where you’re going, where you want to go and choosing to go in a particular direction. You always hope of course that the direction will be better. It may not be better straight away; you may be developing a market which doesn’t pay in the short term.
But be aware of where you are, where you’re going and realise that you can act to change things, and bring them back onto the desired or favourable path. This is both about choice and realisation, understanding the reality of today, predicting as much as possible what can be foreseen and designing a favourable trajectory.
This article was inspired by the book How Will You Measure Your Life by Clayton Christensen available on Amazon.