There’s a ton of stuff to keep track of when you’re trying to grow a business. Inputs, outputs, customers, time, investment, impact and the list goes on and on. How do you know what’s important to track and what’s not? What’s the difference between vanity metrics and the metrics that represent real dollars in your bank account?
I have some tips to help you out and they all revolve around supporting the strategy your building for your business already.
Having your strategy (essentially your why, what and how) together will help you manage and measure the effort you’re throwing into your business. There’s a catch though, business strategy, the instructions that you're constantly building and adjusting for your business comes in lots of flavors and sizes.
On top of that there’s no single best approach that is always applicable for every situation and no single tool that fixes every problem or overcomes every challenge in your business. Which ultimately leads me to one of my BIGGEST pet peeves, when I hear “consultants” talk about a single process they run everyone through.
Literally makes my skin crawl.
I am a big fan of having a strategic toolbox to sift through to help the business owners I work with find resources that makes sense to them and create change that matters. It works because just like in real life when you have a specific problem with your car or house you (or someone you pay) reaches into a real tool box and pulls out the right tool for the job. In this post I’m going to outline some important metrics you should be keeping track of, these help you identify specific problems or opportunities. That way when you reach into your strategic tool box you have the right information to pick the right tool for your business growing job.
Why should you care?!
The challenge for you as a busy business owner is to choose the right approach or tool to help you manage your business. Maybe you’re looking to create overarching guidelines in your business or you need to decide how you’re going to sell you to a particular customer. Maybe you’re somewhere in between the 30,000 foot view of your business and boots-on-the-floor action. At each one of those stages there might be a different tool to help you navigate the buffet of possible decisions you could make and track all the outcomes that are possible.
How do you know which one is for you at any given moment?
You know based on the data you’re using. If you’re a savvy entrepreneur type you might better know the meat and potatoes of your business as metrics. If you don’t identify as with the sexy way entrepreneurs are portrayed in the media that’s ok too - this is also for you.
Better data (or metrics) means that you can better scan through all your options and pick the advice and resources that will be the most helpful. Better data and metrics will also save you and your business lots of time and frustration if you’re working with any type of would-be “consultant” that might be trying to funnel you through some predetermined evidence-based system.
PRO -TIP: Most peer reviewed, well documented and established strategic frameworks are evidence-based.
Here are a list of 7 metrics you should be keeping track of in your business. These are not the only 7 you should be keeping track but it’s a good start if you’ve just been winging it for a while. It’s in identifying challenges or opportunities in any/some of these that should guide how you find solutions or resources to get the most out of the time and energy you’re putting into your business.
I need to throw out this disclaimer before we get into these - If you’re not tracking these in any kind of real and quantifiable way (some might be a little fuzzy I know) then you will not get any value out of this!
1. Gross Revenue
This is the money that’s coming into your business. Tracking gross revenue weekly or monthly can help you keep track of how the return on your efforts as you’re out in the world making people’s lives better. It can also help you identify patterns in your customer's behavior, especially if there is some kind of seasonality to your business.
2. Leads and Referrals
This one can be applied to you retail folk but it’s better suited for any kind of service business. Tracking your leads and referrals every week or month can be really helpful in identifying where your business is coming from. I am a big fan of doing the most important work and putting your most attentive energy into the places you know yield great results for you. I know resources are finite and I know you know what it feels like to have lots of lines in the water with nothing biting. Keeping track of where your leads and referrals are coming from will help you avoid sales and marketing burnout and find the resources to help you better leverage the places you know your best business comes from.
3. Profit Per Customer/Sale
It blows my mind when I ask people what their profitability looks like per customer or sale and they stare blankly at me. Don’t be a blank-stare’er. You need to know how much profit you’re getting from each client or sale for so many reasons. A few of which include how you’re pricing your goodies, how much time or energy each transaction demands of you and how scalable your business is. If every time someone pays you for something you are winging it how can you expect to get better and build a sustainable business that will support the lifestyle you want?
4. Cash or Operating Reserves
If you're small you might not have much cash but your biggest asset could be time. You still want to manage time just as you would any cash in your business. How are you spending your resources? Are you weighing any opportunity costs? Have a list of priorities in terms of what gets your attention or cash when you’re working? It’s ok if you don’t have answers to all of those questions right now. What’s not ok is not tracking where those resources are going and what the returns or outcomes are on any of those investments. Keep track of your cash it will help you manage any kind of seasonality you happen to uncover while you’re keeping an eye on your gross revenue. See what I did there? It’s all connected!
5. Inventory or Client Turnover/Lifecycle
This is a fun one. How long do your goodies usually stay on your shelves before they sell? If you sell anything every extra day something sits represents cash your business doesn’t have and the growing possibility that it might not sell/expire. You might not ever be as tight an inventory management ship as Wal-Mart but buying appropriately will help you from sinking cash into too much inventory. For my service kin out there the equivalent measure is capacity. How many people can you serve in any given day, week, or month? If you are charging a fixed fee for service you want to make sure you are doing the best job you can and moving those clients through your service pipeline so that you can free up space to take on new clients. The longer it takes you to deliver the longer it will be before your next paying customer steps up and engages with you.
6. Market Share and Brand Equity
These metrics can be a little fuzzy for some business owners. The goal here is for you to keep an eye on where your business is in relation to your competitors in your industry. If you can get census data or some kind of industry specific insight on where you place that’s great. It’s also ok if you can’t but, if you’re fighting to get people to walk through your doors (physical or digital) and spend money then you should evaluate your competitive landscape every once and awhile. Don’t think you have competitors? I’m willing to call you out and challenge you. I challenge you to think about any feasible substitute someone might be able to spend their discretionary dollars on and achieve some kind of similar outcome, feeling or experience.
7. Time To Market
How long does it take for something to go from being an idea in your brain to an actual saleable thing. Keeping an eye on Time To Market will give you an idea of efficient your operational processes are. If you’re like me then you probably have lots of projects that you get really excited about, start and then never finish. Measuring Time To Market will help you keep yourself from investing too much into projects like this and to help keep you focused on the things that matter in your business. Those are things like serving your existing customers and doing the work that gets you recognized in your market.
Just because your business is small, or smaller than your competitors, that does not mean that you can overlook being analytical. Every week or month you should be sitting down, getting elbow deep in the data of your business and looking for trends. It’s in how the data of your business changes over time that you will be able to identify REAL opportunities and challenges.
It’s through your data that you can make decisions, take actions and actually track your outcomes. You’ll also be able to look for the right tools or resources to help you make the decisions you need to make to push your business forward. No generic or blanket approaches to address your business’ specific needs. Keeping track of metrics in your business also keeps you from just feeling helplessly stuck or worse throwing money at anyone that sounds like they might have a good idea on getting your business unstuck.