The Philosophy of Clarity - Empowering Small Businesses Through Focused Goals

At the heart of this philosophy lies the belief that clarity is key. Instead of getting lost in endless reports and complicated metrics, business owners need to focus on a few core areas that directly impact their success. This philosophy is rooted in the idea that regular goals lead to easy growth. When businesses have clearly defined targets, they can make better decisions, take more effective actions, and achieve a sense of control over their future. 

This approach isn't about adding more work; it's about simplifying the process. It's about creating a framework that makes it easier for business owners to understand their financial position and to stay on track. This framework is built on three core goals: Profit, Cash, and Growth. These pillars provide a balanced view of a business’s financial health, ensuring that all important aspects are considered. 

To support this approach, the system uses a visual tool to display information: the SME Clutch grid. The 3x3 grid provides a condensed view of these goals and measures, offering a quick and easy way to understand progress. Each of the three goals has three associated measures that can be focused on. This allows a business to focus on one measure at a time. The grid is based on the principle of Objectives and Key Results (OKR), meaning that businesses should focus on a small number of key objectives with a similar number of key measures that contribute to those objectives. 

Underpinning the philosophy is the belief that businesses are more likely to succeed when they set, track, and are accountable for their goals. Goal setting gives a business direction, and provides a roadmap for growth.

Tracking progress helps to see what is working well and what needs to change.

The system is designed to allow for a focus on the goal difference, rather than just on the goal. The goal difference is the amount that a business needs to improve to meet a goal. This makes the goals more manageable, and progress more tangible.

Accountability adds an extra layer of commitment, ensuring that business owners stay on track. This could be through a mentor, a coach, an advisor or a bookkeeper.

This methodology is supported by the principle of SMART goal setting, that is Specific, Measurable, Achievable, Relevant, and Time-bound goals, as well as lean principles, that ensure that the focus remains on what is necessary.

SME Clutch Grid in Action

To understand how this works in practice, let’s look at a couple of examples:

Sarah, the owner of a bakery, uses the grid to focus on her key business metrics. In the area of Profit, she uses profit (loss), gross profit margin and net profit margin to understand the overall profitability of her business. In the area of Cash, she focuses on direct costs, cash received and cash spent to understand the movement of cash through her business. And in the area of Growth, she focuses on income, cash surplus and net assets, to gain a complete picture of the performance of her business.

Credit Business Example (Amelia’s Marketing Consultancy)

Amelia, a marketing consultant, uses the same grid structure to focus on her business. Like Sarah, she reviews her profit (loss), gross profit margin and net profit margin. In the area of Cash, she reviews her direct costs, her average debtor days, and average creditor days. And in the area of Growth, she reviews her income, her number of invoices issued, and her average value of invoices. By using the grid structure, and the associated measures, both Sarah and Amelia can gain insight into their business performance.

Benefits of this approach