Real Business spoke to London Coaching Group founder Shweta Jhajharia founder how to reduce risk.
1. ‘Businesses don’t speak in English’
“Profit, sales, cash flow receivables, assets, equity and ROI are all words and numbers – that a professional businessperson must understand and apply whenever they make a decision about their business,” said Jhajharia. “By understanding the numbers you reduce the risks associated with any decision.”
Be forewarned, however, that while you need to understand your financials, the real core of the language of numbers includes non-financial numbers that are critical to every major decision in your business.
2. Understand what metrics are critical to measure
In marketing, you should measure:
- Conversion rates from various strategies;
- Average response rate of campaigns; and
- Return on marketing investment.
In sales, you should determine:
- The average pound value of your transactions each month;
- The number of transactions each month; and
- The activity each sales person undertakes to meet targets.
In team management, you should consider:
- Your ratio of interview to hire;
- Your turnover rate;
- How truly ‘objective’ your team objectives are; and
- Justification of an employee’s cost to the business.
3. Learn how best to craft your business objectives.
Take another look at your business objectives – are they measureable
What this means is that your goals should all be:
- Specific spell out exactly what you want to achieve and how you want to achieve it. Numbers are really good here!
- Measurable distinct criteria which allow you to measure your progress and determine the success of your work.
- Achievable There’s nothing worse for motivation than to have constant unattainable goals.
- Results-oriented There’s no point having goals that don’t actual relate to the success of your business.
- Time-Bound ” This is critical. Remember, a goal without a timeline is just a dream.
“Successful business owners don’t leave their business to chance,” said Jhajharia. “Really, they don’t take risks. They follow fundamental principles that allow them to calculate their probability of success, and choose the ‘risk’ that is, in fact, most likely to succeed.
“Without learning to calculate risks in this way, you’re just making guesses and hoping for the best. Instead, if you clarify your objectives and then work towards those though the language of numbers on key metrics, you will then stop relying on chance, and instead take calculated risks that have an increased probability of success.”