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How to Use Key Performance Indicators in Strategic Advising

[fa icon="calendar"] Wed, Nov 27, 2019 / by Kathy Gregory

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There’s a phrase used regularly in training and working-out that translates to so many other things in life:

“Get comfortable with the uncomfortable.”

This modest sentence is powerful. It’s only in the difficult places that we grow, so the more we can get comfortable with things that make us uncomfortable, the stronger we become.

For many in the accounting space the actions required to be a good advisor can feel uncomfortable at first. Connecting with the client through communication, and deep listening and understanding of business goals, are not necessarily things accountants learned in school, or primary requirements in traditional public accounting.

It’s easy to lean on just the reporting of the numbers to get through your advising, and certain numbers are especially attractive. Key performance indicators are probably at the top of this list. You should definitely use KPIs in your advising services, but they should not be the primary focus.

The most effective ways to use key performance indicators:

Key performance indicators are useful in strategic advising because they:

  • synthesize a myriad of data points to single metrics that can be used to gauge performance
  • provide a useful bridge between what you know and what your clients know, and facilitate communication and understanding

If you stop there, however, you miss the bigger picture and the real reason to use KPIs. KPIs are not the answer to Strategic Advising—they are just the scorekeeper and the communication tool.

There are important ways to optimize your use of key performance indicators to make them truly useful.

Make key performance indicators more useful by measuring them against a plan.

Data points alone have little meaning, but data points set against goals have vast meaning.

For instance, it’s somewhat useful to know that my business is generating $50,000 in revenue this month. But what if my business had planned to generate $65,000? What’s causing that downturn, and is my spending in line with it?

The questions and conversation you can have with your clients about the why are at the heart of the real value in your advisory service. If you stop at simply reporting the number, you miss the valuable questions that will help them understand what happened and how to adjust.

LivePlan Revenue BreakdownUse standardized charts and graphs to view metrics.

When you meet with clients and transfer information from your brain to theirs, you’re relying on their short term memory to process and store that information. We know that the brain can only store between five and nine items in short term memory. So keep it simple! You want your clients to remember what you’ve discussed.

The good news is the standard seven financial KPI metrics (Revenue, Expense, GM, Net Profit, Cash, AR, AP) are enough to measure all aspects of business progress. Check out that number: seven! The magic number for short term memory.

LivePlan Dashboard Overview

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Simple is best for charts and graphs

Beyond how many metrics you track, simple charts and graphs to represent the data are best as well. You might like fancy graphs, but small business clients like simple charts. And this also has to do with brain function: specifically how the brain interprets images.

The brain uses cues, both hardwired and learned, to interpret an image and register understanding. As a trained accountant, you are familiar with all aspects of financial data, so your brain has these reference points hard-wired. However, your small business clients are not familiar, so if they are given new or complicated charts and graphs each time they meet with you, they are spending the valuable time you have together just developing new references for their brain to draw upon.

Fancy charts could be your undoing. Keep it simple, and most importantly, keep it consistent! After all, clients are paying for value, and value is only valuable to them if they understand and remember.

Strategic advising is about identifying the changes needed

The idea of implementing KPIs as the primary advising deliverable is short-sighted. As numbers people, accountants often lean on the data to get them through the advising. But the numbers aren’t the magic of effective advising.

The real value in Strategic Advising is your ability to help your clients make business decisions and necessary changes. KPIs help because they allow you to measure performance, but it’s in the bit that comes after, the conversation and the actions, where your real advising happens.

Because you are measuring business performance against a plan, the changes you facilitate will be one of two types: a change to their plan, or a change to their business operation to affect performance next month.

Build a plan and forecast to begin your advisory service

If you want to be a valued Strategic Advisor, start by asking your clients questions about their business goals, instead of going straight to numbers:

  • What makes your business unique? What do you love about it?
  • What are your sales or growth goals for the next year?
  • Tell me about your ideal customer: What are their needs? What problem do you solve for them?
  • Who do you rely on to do what you do? What do they do for you?
  • What do you need in order for your business to run perfectly?

Then, use that information to build a Lean Plan for your clients: a roadmap. We developed The LivePlan Method for creating that plan and managing to it. 

Developing the plan with your client can feel uncomfortable. It requires new styles of communication and listening, but it will be at the heart of your real value as an advisor.

Get comfortable with the uncomfortable, and make a real impact on your small business clients. Their businesses, and your own, will grow because of it.

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Kathy Gregory

Kathy Gregory

Kathy Gregory has over 20 years of experience in business development, including: financial forecasting, strategic planning, process development, project management, and mergers and acquisitions. She has worked in public and private, small to mid-size organizations doing business development, and strategic planning and implementation, working with executives, boards and their investors. At LivePlan Kathy runs the specialized program for Strategic Advisors. She is a graduate of the University of Oregon.

Topics: Business Process for Advisory , Working with Clients

Content, tips and best practice for accountants, CPAs and bookkeepers who offer Strategic Advising Services to small business clients.

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