Assessing the performance of your business is very critical. Once you start operating you need to frequently assess your business performance against the business plan, against your competition and against the general performance of the economy. This assessment will show whether your business is growing or whether there are issues that need urgent attention. Failure to regularly assess business performance could spell disaster for the business. The economic environment is always changing and affecting business performance positively or negatively. It’s therefore very important that you assess the impact of these environmental factors on your business.
Reviewing the performance of your business will highlight if the business is making progress in meeting its business plan and also if it’s appropriately responding to market demands. The assessment can also be used to gauge whether the business is ready to move onto another level.
Your first step in assessing business performance is to review your business plan in light of the changing economic environment. The assumptions that you made when preparing the business plan could have changed dramatically and hence would need a review so that assessment of performance is done on current market conditions. This process will help you identify the emerging risks that are affecting your business which you should respond to.
As you go through the business plan review you need to check your current situation and where you want to be in the future and how you will get there. You need to re-evaluate the markets you are operating in now and ascertain whether you will still be operating in the same markets in future or you need to adjust. You will also need to see how you can create competitive advantage to survive competition.
In your review you should critically appraise your core activities, the products or services you are providing, their critical success factors – those factors that will make your business stand out against the competition. These are the things that you would need to attend to as a matter of urgency because they will determine future success.
Business assessment will require you to look at all internal factors that might restrict the growth of the business. Issues like the ownership or lease period of premises can restrict the expansion of the business. You need to have flexibility to grow the business. Machinery should also be evaluated to see if the technology being operated is up-to-date and that the equipment is not obsolete. Good machinery will determine whether the business will be competitive into the future and if it will operate efficiently.
The performance of the business is highly dependent on staff so you have to assess if the business has the right people to achieve business objectives. Check if the staff is well trained and very motivated to meet goals. You also should look at the professional skills your management team possesses and whether it is well placed to see the growth of the business.
In your assessment of performance you should also carry out competitor analysis. Your competition might have changed since commencing operations. You should gather information on who your competitors are and what they are doing, what they offer, how they price their products, their major customers and what their competitive advantages compared to yours are. Competitor analysis might explain some poor performance the business might be going through and also assist you in coming up with strategies to win and grow market share.
As you review your business plan you should update your marketing plan at the same time. Markets are bound to change with changes in the environment so you should relook at factors such as changes in your market, new and emerging services, changes in your customers’ needs, changes in the competitive activity. Interacting with your customers will help to identify where improvements can be made to your products or services, your staffing levels or your business procedures. A review of the market and customer needs can give you an edge over your competition.
After the review you need to draw a roadmap on how you will achieve your revised goals. 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.
In assessing the business there are a number of useful business-analysis models that one can use to help you think more strategically about your business. One can use the popular SWOT analysis (strengths, weaknesses, opportunities, threats). This model is used to analyse the strengths and weaknesses of your business’ capabilities, and any opportunities and threats to your business. Once you’ve 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. A SWOT analysis can therefore be used to provide a clear basis for examining your business performance and its prospects. It can be used as part of a regular process of business performance review.
Other very useful tools to analyse and explain the performance of the business include the: PESTEL – a framework for understanding the various external factors affecting the business, namely, Political, Economic, Social, Technological, Environmental and Legal; Scenario planning – a technique that looks at various possible views of the future for the business; Critical success factor analysis – a technique to identify the areas in which a business must succeed in order to achieve its objectives and lastly the Porters Five Forces – a technique that analyses five factors that determine the attractiveness of the industry namely, potential entrants, existing competitors rivalry, power of buyers, power of suppliers and substitute products/services. Using these models will help coming up with strategies to improve performance.
The process of assessing business performance will also require that you conduct a financial analysis of your business against strategic goals. This would involve analysing your current financial statements looking at the trends in cash flow, revenue and expenses, current sales of various products or services, level and turnover of stock, review of debtors and creditor days and how the business is being financed. You would use various financial ratios to compare your business’s performance in different time periods, or compare the performance of your own business with the performance of other businesses by comparing your ratios with statistics and other benchmarks that governments and industry organisations publish.
Assessing performance should not only be based on financial ratios, but there are other non-financial measures that are very critical to the business such as quality, speed of delivery, staff morale or customer service. There are a number of measurement tools that can be used to ensure that both financial and non-financial factors are considered. Some of the popular tools are the balanced scorecard, the building block model and the performance pyramid.
When assessing performance management should avoid the following measurement pitfalls. Firstly you should avoid relying only on measuring performance by comparing actual against the company’s budget. You might be doing well against your plan but you might be failing dismally against the competition. It’s therefore very important to ensure that you also compare your performance with the competition or the industry as a whole.
The second factor to consider is that if you only use financial ratios you might end up focussing on current and historical performance rather than looking into the future. Non-financial information will assist you in having a future orientation in performance assessment. For instance if your customer service is good and your product quality is high your business is likely to be successful in the future.
One should therefore avoid putting too much reliance on financial figures only because it creates an attitude where managers will concentrate on those ratios that are considered important at the expense of other issues. You should bear in mind the saying that “What gets measured gets done.” Lastly, financial information is susceptible to manipulation during budget preparation or when computing ratios. So it’s is very critical that other non-financial information is used in assessing business performance.
About the author
Stewart Jakarasi is a business & financial strategist and a lecturer in business strategy and performance management. He provides advisory and guidance on leadership, strategy and execution, preparation of business plans and on how to build and sustain high-performing organisations. For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: firstname.lastname@example.org or +266 58881062 or on WhatsApp +266 62110062
LEC to switch off households over debts
MASERU – The Lesotho Electricity Company (LEC) will from Tuesday next week begin switching off clients who owe it money.
The LEC issued a seven-day ultimatum to all customers who owe it on Tuesday last week. The deadline ends on Monday.
It is expected that the LEC will begin switching off households that have defaulted.
The state-owned power company, however, is not going to touch any government department or business entities that owe it on grounds that they are in payment negotiations.
The LEC move comes barely two weeks after it cut electricity supplies to the Water and Sewerage Company (WASCO) thus causing it to fail to pump water to communities countrywide for more than two days.
The LEC says it is owed close to M200 million by government departments, businesses and individuals.
The LEC spokesman, Tšepang Ledia, told thepost that the government and the businesses will not have their electricity cut because they are in negotiations.
“We are in negotiations with the government and businesses and hopefully they will pay,” Ledia said.
“We advise the ordinary people to pay their debts before the 20th of March 2023 or else we cut the services,” he said.
The LEC says it is running short of funds for its daily operations.
In December last year the company increased power tariffs by 7.9 percent on both energy and maximum demand charges across all customer categories for the Financial Year 2022/23.
Last week the LEC boss, Mohato Seleke, said postpaid consumers and sundry debtors owe the company M169.4 million.
He said unless the debtors pay he will be unable to buy electricity from ’Muela Hydropower Project, Eskom in South Africa and Mozambique’s EDM.
This, he said, could cause serious load shedding in the country and could be devastating for businesses.
Seleke said the LEC spends M630 million monthly to buy electricity.
“If postpaid consumers do not settle their debts this could prevent the LEC from being able to buy electricity which can lead the country to encounter load-shedding,” Seleke said.
Seleke said collecting debt from government department ministries was a challenge as there is an understanding that since LEC is a state-owned company, it will continue supplying government agencies with electricity and they will settle their bills when they have funds to do so.
Seleke said the LEC has lost M21 million to vandalism during this financial year.
Bumper payout for former mineworkers
MASERU – AT least 11 316 current as well as former mine workers are set for a bumper payout after Tshiamiso Trust began disbursing the first billion Maloti to workers who are suffering from silicosis and tuberculosis.
The payment comes two years after Tshiamiso Trust began processing claims for the historical M5 billion settlement agreement between mineworkers and six gold mines in South Africa.
Speaking at the payment announcement in Maseru last week, the Trust’s CEO, Lusanda Jiya, said it has been two years since they officially began accepting claims.
“Our people come to work every day with the mission of impacting lives for the better, and the first billion rand paid out to over 11 000 families is just the beginning,” Jiya said.
“We know that there is no compensation that will ever be enough to undo the suffering endured by mine workers and their families,” he said.
“However, we are committed to deliver our mandate and ensure that every family that is eligible for compensation receives it.”
Jiya said the Trust is limited both in terms of the time in which they can operate, and the extent to which they can assist those seeking compensation.
Broadly speaking, the eligibility criteria include among others that the mineworker must have worked at one of the qualifying gold mines between March 12, 1965 and December 10, 2019.
Secondly, living mineworkers must have permanent lung damage from silicosis or TB and deceased mine workers representatives must have evidence that proves that they (the deceased) died from TB or Silicosis.
Tshiamiso Trust has a lifespan of 12 years, ending in February 2031.
Over 111 000 claims have been received to date, through offices in South Africa, Lesotho, Botswana, eSwatini, and Mozambique.
The Trust is working with stakeholders in these countries and others to mobilise its efforts and expand operations.
The history of silicosis in South Africa goes back to the late 1880’s when the first gold mines began operations.
The gold was stored and locked in quartz, a special rock that contains large amounts of silica.
Crystallised silica particles can cause serious respiratory damage if inhaled.
In the earlier days of gold mining, dust control, health and safety standards and the use of PPE (personal protective equipment) were not as advanced as they are today.
Tshiamiso Trust was established in 2020 to give effect to the settlement agreement reached between six mining companies.
The companies are African Rainbow Minerals, Anglo American South Africa, AngloGold Ashanti, Harmony Gold, Sibanye Stillwater and Gold Fields.
The settlement agreement was reached and made after a ruling by the Johannesburg High Court as a result of a historic class action by former and current mineworkers against the six gold mines.
Justice for Miners is a coalition of interested parties in the mining sector launched at the Nelson Mandela Foundation in Johannesburg in 2020.
The Johannesburg High Court approved the setting up of the Tshiamiso Trust to facilitate payment by the companies to affected miners.
Farmers cry over cost of livestock feed
MASERU – Lehlohonolo Mokhethi is a farmer who has been running a successful poultry business, thanks to a small loan he got from a local bank.
He now has 300 chickens.
He says his vision is to rear 5 000 chickens by 2025 and employ 30 youths. But he is now grappling with a new challenge: the ever increasing cost of chicken feed.
That is threatening the viability of his business.
“The biggest challenge is that food prices increase every day, feeding is expensive,” Mokhethi said.
“It is quite difficult to make profit in business if each and every day food prices increase. Today I am buying a bag of food with a certain amount then the next day the price has increased,” he says.
“Our customers fail dismally to understand that food has increased and the Chinese are taking our market because they sell at a low price thus I run at a loss.”
Last week, a top attorney in Maseru who is also a prominent farmer, Tiisetso Sello-Mafatle, called a meeting for farmers to discuss these challenges.
She says the government must regulate the prices of livestock feed.
That is critical if the farming business is to succeed, she says.
Attorney Sello-Mafatle says farmers must come up with a structure for livestock feed prices which they would present to the government for gazetting.
“We should state our regulations and give them to the government to make everything easy for both parties because we cannot wait for the government to make regulations for us,” Sello-Mafatle says.
She adds that “farmers should be bullish about what they want and never have fear endorsing new things”.
“I will not be challenged or cry (because of) what life throws at me but I will cry when things are not happening the right way,” she says.
Mafatle says farmers need to know who they are and know the capabilities they have.
“This will help a farmer in becoming the best in any field they are in once they are confident about themselves,” she says.
Karabo Lijo, another participant, said they have to influence the cost of inputs in agriculture, especially livestock feed.
“We have to go back to cost-price analysis where as farmers we are able to derive the selling price and the break-even point in our production,” Lijo said.
“We can also derive the stable or constant mark-ups on our products,” he said.
“We need to do research to increase the ability to produce byproducts which are likely to have the longest shelve life,” he said.
The meeting urged farmers to diversify their products by introducing such things as mushroom farming. They said mushrooms can grow very well in Lesotho due to its favourable climate.
The farmers also demanded that there should be regulations on how land can be sold or borrowed in Lesotho.
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