corecubed: The “Bottom Line” is NOT a Rudder

November 2006 online newsletter article

The “Bottom Line” is NOT a Rudder

Is your business where it needs to be? Has your business met and surpassed the goals you put in place for it this year? (Hopefully you DID put goals in place.) What steps must be taken to ensure a successful future?

Many business owners look to what we call “the bottom line” as the primary indicator of their company’s overall performance. By “bottom line”, we refer to the hard fiscal data gleaned from the company’s financial statements. And, it is indeed one very important measurement for success.

Cash flow, net income, gross profit, accounts receivable, accounts payable, liabilities, assets, profitability – these are all “bottom line” measurements. And they’re all extremely valuable in evaluating how the company has performed.

Living solely by the bottom line, erecting it on a pedestal as the only measurement to gauge the company’s well being is, however, a mistake. The bottom line should not be used as the rudder by which a business owner charts his or her company’s future…

…because the bottom line only shows what has happened in the past.

What it does not do is assist in strategically planning for the future.

The answer: A “balanced scorecard” for measuring success.

The bottom line is what we refer to as a “lagging indicator”, and although extremely important is all about the past.

What you need to effectively grow a business is not only lagging indicators, but also current indicators, which tell you how the business is doing right now, as well as leading indicators, which can show you what you can expect in the future.

In short, you need a balanced scorecard that mixes past, present and future measurements to give you a well-rounded picture of how the business has done, is doing, and what you want to do in the future. And it is this future projection that you use marketing strategy to reach.

That’s what corecubed can do for you. Help you strategically plan marketing so the future looks much better than right now as well as past performance.

The balanced scorecard: how do you start?

There’s no real mystery to creating a balanced scorecard to measure your organization, business unit or department’s success. It’s all just a matter of understanding how quantitative measurements interact with strategic ones.

A balanced scorecard must have these three attributes:

It must balance both long-term and short-term actions.

It must balance different measures of success. Specifically, it must take into account not just financial indicators, but also customer service indicators, internal operations indicators and human resource indicators. It must look at what the competition is doing, and how what you have done measures up against that competition.

Lastly, it must contain measurements that can determine whether the actions taken by your business are moving that business closer to its strategic goals, or further away from them.

How corecubed can help...