How To Measure What Matters for Your Business
When you’re in business for yourself, what you want to do is the thing you went into business to do. And yet, to do that thing, you also have to do the ‘being in business’ thing. That means getting customers, doing marketing so they can find you, and getting those customers to pay you. Ideally, if you’re going to be successful in your business, those payments need to exceed your bills.
It’s quite easy to feel overwhelmed with all the things you need to do for your business. The business of being in business can seem to take over. So, it’s no surprise that many startups, and even more mature businesses, tend to avoid reviewing the numbers or reflect on the health of their enterprise.
But, as the experts we talked to for this article explain, ignoring your business data is a mistake.
The Stats that a Business Should Track
The vital stats you should be tracking come under these five key headings:
- Marketing – This includes, but is not limited to, the ‘insights’ and dashboards in your social media accounts.
- Website – How much traffic is your website getting each month? What’s your click-through rate and conversion rate for sales pages and articles? Google Analytics is easy to set up and has a wealth of information you can use to understand your website performance.
- Leads – If you’re not using a CRM system (Customer Relationship Management) that will record leads or opportunities, a simple spreadsheet is fine! Just make sure you’re making a note of all your leads and sales conversations.
- Sales– Ideally you’ll see this in your accounting software. If not, you can create a simple spreadsheet of the invoices you’ve raised. Or if you ask for payment via credit card, your processor (Paypal, Stripe etc.), should have a dashboard for you with sales totals.
- Money – Again, ideally your accounting software will show this for you. Otherwise it’s simply a case of checking your bank balance and keeping track of profits and expenses each month.
Making It Even Simpler
We talked to Lucy Whittington, co-founder of the app Statzy, a super-clever app that helps businesses track their vital stats (the app was developed precisely because of the effort needed for business owners to track their stats).
If all this information is a bit much for you to manage Whittington suggests you could summarize your data as your ‘leads’, your ‘sales’ and your ‘money’. As she says, “it may look something like ‘current opportunities in your CRM’, ‘prospects who’ve booked a sales call’ or ‘email list sign ups’ for your leads.” She goes further and explains that for sales, you could track the number of sales you’ve made (number of invoices sent/transactions) or, even better, the value of sales you’ve made.
But as she points out, the most important number in any business is in your profit and loss statement. Your profit tells you if you’re making money or not—and if you’re a small business, that usually determines whether you get paid or not!
As an accountant, Sally Farrant of Business Growth by Numbers agrees with Whittington’s focus on cash and profit. She sees “so many people burying their head in the sand when it comes to their business accounts.” For Farrant, cash is the most critical number in any business, small or large: without cash, the business will not survive.
Pip Evan-Cook of the Marketing Architect supports solopreneurs and business owners with their marketing. She helps them create researched, tailored, and budgeted marketing strategies, and then provides a virtual marketing team to implement it.
She advises that to identify the business bottlenecks that are preventing you from reaching your goals, you need a big picture view of how your business is functioning. It’s no good selling huge amounts of your service if the delivery of your service or quality of your product is letting you down.
And then Elizabeth Harrin of a Girl’s Guide to Project Management offers an alternative approach. Harrin suggests tracking the success of your various projects, because a strategy that stays on paper isn’t any good to anyone.
One idea: you could track your project performance. How well are those projects sticking to their original plans? You can figure this out by looking at your planned and actual budget for the work, and the planned and actual timeline. If you’re halfway through a project and have spent more than half the money allocated, that might be a warning sign. Harrin advises that you work out what your projects are going to deliver for you and set up a mechanism to track those metrics (this could be as simple as a spreadsheet, or depending on the number of projects and complexity, you might use project management tools such as Asana or Scoro).
And how often should you review? Farrant suggests setting clear goals at the beginning of each quarter and working out what you can realistically achieve in that time, course-correcting as required. Whittington suggests you should review your numbers monthly at the very least, and ideally weekly or, if they are critical, even daily.
What are Your Vital Statistics?
Why don’t you take a moment right now to jot down what your key numbers are under the five headings we mentioned above?
If you’re not sure, it can help to work backwards, from Money, and up to Marketing.
What is the profit you need to pay yourself? Essentially this is your take-home pay, what would have been in your salary slip. Write down the number you need to cover your living expenses, your household bills, transportation, and of course make sure you have enough for some fun as well.
What is your cash number to ensure you can pay all the bills in your business? This covers all your hardware expenses, any materials you use to create what you sell, the labor you employ, the software tools you use. (And don’t forget your Namecheap renewals!)
How many sales do you need to make to create that cash? If you’re a yoga teacher, and your customers pay $15 per class, and you have 10 students in each class, how many classes do you need to fill to cover your cash expenses (any studio hire for example) and leaving enough profit to cover your living expenses?
How many leads do you need to be sure of that many sales? Do you talk to 20 people and only half of them turn up? And how many visitors to your website, or your marketing efforts are needed to give you those leads? If you’re that yoga teacher, do you know where your flyers need to go so you can talk to those 20 people? Do you know how many people visit your website for you to get those 20 leads?
Do you know your business vital statistics?
Beware of Vanity Stats
When you’re reviewing numbers, be careful not to get distracted by what Whittington calls “vanity stats”—things like how many people like your Facebook page or follow you on Twitter.
Whittington notes that lots of media likes, or high engagement stats, video views, and website hits don’t mean you are making money. “It can be very distracting (and often unnecessary) to chase ‘big numbers’ that don’t ever translate into leads, sales, and actual money in the bank,” she says.
You need to know your business works and understand how your marketing converts to sales. As she explains, “If you know that for every 100 Facebook Likes you get 10 people visit your website, and five of those become leads, and one goes on to buy your product or service, then go ahead and increase your Facebook activity.” She cautions that if you’re not tracking your numbers as a whole (including your sales figures) you won’t be able to tell if spending time and money on Facebook will have any impact on your business.
Evan-Cook agrees and warns against businesses focusing on the number of leads that are being generated, instead of pausing to examine the quality of those leads. She counsels that it is far more important to focus on identifying how many of your leads actually converted, and how the converting leads were generated—in other words, whether or not you’re getting the right leads, rather than the right volume of leads.
It may be more useful to know, Evan-Cook explains, which leads have converted to customers, and which customers went on to become repeat buyers, generating a high lifetime revenue. Figure out which marketing activity delivered these particular customers, and then focus on increasing that marketing channel. This will be a much better use of your time than scattershot marketing. She says, “you’ll increase profitability and save time by looking for the ‘right’ customer rather than ‘any’ customer or ‘any’ lead.”
You also need to watch out for the “‘turnover’ vs ‘profit’ mistake. As Whittington points out, just because you might be selling doesn’t mean you have anything left after expenses have been accounted for. If your expenses are a bigger number than you generate in sales, you’re not actually making any money.
And as Whittington says, “always bear this in mind with any ‘six figure’ and ‘seven figure’ show-offs.” When people quote huge sales figures, they usually aren’t talking about profit.
In sum, if you know your sales numbers but are a bit hazy on everything else, see if you can find out where your customers heard about you (the marketing source) and why they decided to buy (which message they responded to) and then track how long that process is. This will put you in a very good position to make more sales.
What If Your Year Isn’t Going Well?
This is when burying your head in the sand is the worst thing to do.
What do you do when you realize you’re in trouble? The first thing to do is stop.
Review what’s working and what’s not. This is when your data can really help you. Once you see what is working, do more of that. For example, examine what you’ve done in the past to win certain clients or sell a product. If you got feedback or reviews, now is a good time to reflect on them. If something is going well, how can you amplify those effects?
And if nothing is working, realize that this is a chance to learn and try something new. Here are a few things you might do to change things up:
- Survey current customers/recent customers and ask them why they bought from you.
- Change your pricing. Maybe it’s too high—or, believe it or not, too low. (Sometimes a higher price point will convey additional value and win you new customers). Try out special offers or package pricing.
- Test different elements to your marketing, such as a new social media presence or ads. For some marketing campaigns, for example a Facebook ad, you might know on the same day if that approach isn’t working, especially if it is for an impulse buy. For other campaigns, it might take time, repetition of the message, and a consistent presence.
But go slow. As Whittington says, “don’t do lots of changes at the same time, as you still won’t know what works and what doesn’t!”
Whatever you try—be sure to measure the results!
Our recent research identified that only about 30% of solopreneurs are getting help from others.
If you’re really confused about what might be your key numbers, Whittington makes it easy for you with her app Statzy. Just take a look at this lovely shortlist of ‘key stats’ here as a helpful starting point, it covers all the key stats from any of the platforms you might be using.
Evan-Cook also recommends Statzy to collect and record social numbers for all of your social media platforms and websites in one place. She also notes that marketing metrics can be easily accessed using Google Analytics or Facebook Insights—and if you want outside help any marketing consultant worth their salt will be able to help you with this.
Farrant recommends bringing in an expert, even if it is just to teach you how to do it yourself. It may take a lot of stress off you if you hire a bookkeeper for an hour a week, or someone to teach you about your accounts, or even just a year-end accountant. You might also benefit from a search engine optimization consult, some help with sales copy, or a social media expert to advise you on ads. Although all of these professionals cost money, consider these pros as an investment that will save you time and money in the long run.
Summing Up (Pun Intended)
If you’re discouraged by your numbers, you should at least congratulate yourself on knowing where your business stands. That gives you a starting point that you can measure. You will know which parts of your business aren’t working well, and you can focus on fixing them. And if knowing where your business stands gets totally overwhelming, recognize that it may be time to ask for help.
As Whittington says, “Measure what matters!”