Critical factors for success and performance targets

The survival and performance of a small business, however, goes beyond people and rather to all resources, including various physical assets used in the business such as inventory, vehicles, equipment, furniture, and major assets like customers and inventory. For manufacturers ad retailers, as well as wholesale operators, inventory may be the dominant asset in terms of money invested.

One critical factor, is the financial profile of the small business - the relationships between sales, expenses and profits. Unless an acceptable and achievable profile is adopted there may be little chance of a small business surviving, let alone growing and developing.

Antother target that may be a critical factor for success could be the cost of keeping the business open very day. This often includes the total expenses plus a salary or the equivalent for the owners who are working in the business.

Thus is would be possible for managemenmt to review performance from the las and previous years and, based on this, target for financial performance could be set for next year. Management may argue that, if there has been a steady growth in sales over the past two years, their analysis of the market place may suggest that sales could further increase. Their review of the purchase of inventory for sale and discussion with suppliers may mean that they believe that some economies of sale can be achieved through better buying, so that gross profit can be increased substantially next year.

Thus the process continues. A small business in any industry sector can determine the critical factors not ony for success but for grwth and development, and can establish financial and non-financial targets to achieve that growth and success, based onm the critical factors.

Francisco Freitas

www.franciscofreitasgroup.com.br