A simple performance management roadmap basically starts from knowing where we are today, and ending where we want to be some point in the future. It revolves around managing our assets and liabilities to best improve our financial and overall operational performance. This can be used for individuals or businesses
Do we run our company, or does our company run us? I found this a good question to ask myself every so often. Besides, isn’t one motivation of having our own company the ability to call our own shots? To control our financial futures? Being a slave to our company isn’t what most of us sign up for. And one way to ensure this doesn’t happen is to get a handle on our record keeping. In my business experience, the best way to begin is to make a simple management roadmap.
One way to make money is to increase asset performance and decrease liability drag.
Making a simple performance management roadmap:
1 Start by making a simple spread sheet with two columns. Being your trip by listing all your assets on the left.
- Assets are basically the things that make you money. Areas include cash balances, investments, other jobs, tools, vehicles, property, inventory, accounts receivable, lines of credit, workers abilities etc.
- Then in the next column make notes on these assets. For example: Add up their monetary value, prioritize their importance, list age/lifespan, things to do, goals, etc.
- Here’s a simple categorical example. Most likely yours will be way longer and broken down into more specific categories.
ASSETS |
Notes |
| Truck | 7 years old / value $10K / Need a bigger truck by next year (possible sell/trade-in). |
| Inventory | Mostly old stuff / value $5 K / Redo inventory by end of next quarter. |
| Tools | Mix old/new / value $25K / Possible breakdown of main mixer ($10K for new unit). |
| Employee | Good at interior work /poor at exterior work / Possible new hire next year. |
| Savings | $80 K / move $30 K into 1-year treasury / $20 K in Money Market. |
| My ability | Skilled tradesman & supervisor / poor at financial management. |
2. Now make two more columns and list all your liabilities (where you spend your money) on the left.
- This includes finance payments, inventory costs, accounts payable, rental fees, salaries, payroll, overhead, depreciation and any other costs of doing business.
- Alongside these liabilities make notes like monetary value, due dates, or even a system to prioritize their value.
- Again, yours should be longer with more specific categories.
Liabilities |
Notes |
| Loan $30K | 5% interest per year. Outstanding Balance $20K = $23.5K by final payment = $3.5K saved if paid off with cash reserves. |
| Truck payment $330 p/month | $5K remaining with $1K per year for Registration/Insurance. New truck = $25K after trade-in. Increase in payments to $450 p/month + extra $400 increase reg./ins. |
| Office Rent/utility | Rent = $1,400 + $350 utility. Possible need for expansion in a few years. |
| Payroll | $3,600 / month. Secondary hire at $3,000 due to lower wage and economies of scale. |
| Auto Expense gas/tax/ins | $5k per year. Re-run figures for adding second used truck as compared to one new truck. |
| My poor accounting skills | Need help. Talk to Jim further about his recommendations. |
3. Stop and spend time reviewing these to fully understand the flow of your business.
- Look at it like a big jigsaw puzzle and find how they all fit together.
- After some time, you should be able to get an overall picture of the inner workings of each component of your business and project your future plans.
4. Finally, make two more columns. On the left write where you want to be in the future.
- For example, do you want to expand your vehicle fleet, buy new tools/equipment, hire more employees, increase customer base, increase gross sales or profit margins etc.
- It may even include downsizing plans, like the elimination of non-performing assets.
- I used 3 columns using 1, 3 and 5-year goals. This helped me not only with my future planning but provided the basis for my quarterly reviews.
1-Year Roadmap |
Notes |
| Truck Paid off | Pay off truck from cash holding = saving 5% per year which is greater than current treasury yields. Use $3.5K saved towards down payment next year for second used truck. |
| Write off old inventory | Purchase new inventory for only what’s used regularly and write off old inventory (by donating to the goodwill store). |
| Hire New Employee | Contact Temp agency to compare rates. Speak at next Rotary Club meeting and next Men’s group at church to request referrals. Run figures to finalize wage/benefit proposal. New employee needed by October for current business expansion plans. |
| Sub out payroll | Hire Joe’s Payroll service to Free up time to take a general accounting class online. |
Make a Performance Management Roadmap Conclusion
This simple roadmap focuses on using assets and liabilities wisely and diagnosing assets and liabilities to increase business performance. Remember data is more than ones and zeros, it’s all the information, figures, numbers, statistics, costs and information that makes our business go round.
So, if you want to get off the merry-go-round and take control of your business, focus on the most important things first – your assets and liabilities.