Ask yourself this: Is having top tier products or offering market leading services enough for a business to taste success in 2022?
Like any well-oiled machine, the modern-day company requires constant monitoring and preventative maintenance so that success isn’t only forthcoming, it’s sustained.
There are 10 key metrics within a business that you’ll need to get up to speed on if you’re ever going to have a hope of identifying issues or problem areas, and then having the capacity to deal with them in an effective manner as they arise.
In today’s blog, we’re discussing the 10 Steps to Measure EVERYTHING in Your Business for 2022.
WHAT IS A METRIC?
In short, just another name for a Key Performance Indicator or KPI. They’re the health bars of your business, so that growth, performance, and progress towards annual or quarterly goals can be tracked.
It’s important to hold both individuals and departments accountable to their metrics. Rewarding where they exceed forecasts, while at the same time working out the wrinkles and nipping any shortfalls in the bud before they grow into a much bigger problem for your business.
1. SALES REVENUE
This is the big one. The money your business makes by selling their offerings is probably the litmus test of whether the company can be deemed successful – or not.
The equation is a fairly simple one. Sales Revenue is determined by taking the total income from sales, and subtracting the amount returned or refunded.
Sales figures allow you to get an insight into how the marketplace is responding in a broader sense, and is a good indicator of whether you should be beefing up your presence and marketing budget.
2. NET PROFIT MARGIN
There’s no point making a killing in the market, only to have profits eaten up by costs and other overheads within the business. The Net Profit Margin is a measurement of how much of the money from sales is going into the company coffers.
By subtracting sales expenses from your monthly revenue amount, you can accurately predict long term growth (or lack thereof). The Net Profit Margin can be maximised by either cutting back on costs associated with production (think rent, salaries, material costs etc) or by bumping up sales revenue.
Interestingly, there are two ways to go about this. Either you can increase the price of your company’s offerings, or reduce price to increase the sales volume. In the end they amount to the same thing, so take the time to have a think and develop the strategy that’s right for you.
3. GROSS MARGIN
Another huge metric for a business, especially those in their infancy, is the Gross Margin. It’s calculated by taking away the costs of goods sold or services rendered from sales, and then dividing it by the overall sales revenue. What you end up with is a percentage that reflects the cents in the dollar that are retained in the business.
Generally speaking, a high Gross Margin is a sign that productivity is at a good level and there are processes in place within the business that are working as they should.
4. LEAD CONVERSION RATES
Market reach is great and all, but interest in your products doesn’t pay the bills. The Lead Conversion Rates are a way to see how many interested potential customers are actually pulling the trigger and making that order. You simply take the new leads per month and divide them by the number of new paying customers to get your conversion percentage.
There are a few factors that play into pumping up this number such as the quality of product, how well your sales team is working, what customers are saying in their reviews, and a sound digital presence on social media and your website.
5. WEBSITE TRAFFIC
While we’re talking about that digital presence, never underestimate the value of website traffic. It may come as no big surprise that the number of people visiting your company website each month is a reflection of both the effectiveness of your marketing strategy, as well as what sort of reputation proceeds you.
In the modern age, SEO or Search Engine Optimisation is vital so that anyone searching the web for something you offer, ends up on your web doorstep. It may well be time to throw a little extra cash into the marketing and advertising budget!
6. RETENTION RATE
How happy are your customers? Are they loyal, or do they have a wandering eye looking elsewhere for a better deal?
Take a period of time, say the past 12 months. The number of customers you had at the end of the year, minus the number of new customers annually, and then divided by the number of customers at the beginning of the year will give you your retention rate.
It’s important that when someone decides to buy from your company, they keep doing so. Not only for the repeat sales, but for the exponential sales you’ll get from that person’s network.
In the corporate world, word of mouth is pure gold.
7. CUSTOMER ACQUISITION COST
Here’s where things get a little tricky. There is such a thing as trying a little too hard, because at the end of the day marketing costs money. Attracting new customers to the business is a good thing, but only if it’s financially viable.
By taking your total marketing and advertising costs, and dividing by the number of customers acquired, you get a per head dollar amount of how much you’re spending to bring each new person to the business. In other words, the Customer Acquisition Cost or CAC.
At the end of the day, it’s all a very delicate balancing act, so stay on top of whether or not the cost of growth is actually translating into real dollars.
8. CUSTOMER LIFETIME VALUE
This is a pretty interesting concept. While the CAC may be high initially, what if that person buys a ton of goods and services from your business? All of a sudden, marketing overheads don’t seem that bad right.
Customer Lifetime Value or CFV is a way to forecast the revenue that you can expect to earn from the average customer. By multiplying the average sale amount with the average retention time of a customer and the average number of transactions per customer annually, we get an idea of just how much money each newly acquired customer is likely to generate for your business.
9. EMPLOYEE SATISFACTION
Ever heard the phrase: “A happy worker is a productive worker”? Your staff are easily the most valuable company asset at your disposal. Think back to your past employers, and ask yourself – did I go the extra mile for someone who made my life a living hell?
You most likely didn’t because when employees are content in their role their productivity increases, and well, when it’s the opposite, it decreases.
You can monitor how well you’re doing as a company owner by taking on feedback and by issuing company wide surveys. Keeping them anonymous will give you a true representation of how your staff view coming to work, as well as your leadership.
10. GOAL PROGRESS & DEADLINES
Lastly, but most importantly, is how you take all these metrics and put the data into practice. From a sole trader all the way up to a multinational corporation, every business has a set of accomplishable goals for their future – and you should too.
These could be anything from generating a certain amount of profit, to looking to expand into other sectors with new product lines, or even targeting a certain large customer in the market – the list goes on.
On paper, these may seem like daunting and monumental tasks. The secret is to break down the goal into a set of achievable milestones with deadline dates of when you think the company should be achieving them – using your metrics to forecast whether it’s possible first, of course.
Sometimes these deadline dates fall by the wayside, and goal progress can be slow. Use it as an exercise to assess whether there are any issues within your business that are preventing you from moving to the next level.
When in doubt, look at your metrics!
So, to sum it all up no matter the size of your business, utilise metrics as a way to plan for the future by using data from the past.
Assess the effectiveness of the present to unearth any potential snares that may prevent your business from accomplishing the goals it sets out to.
If you are truly ready to invest in your business and implement metrics, the right advice is priceless. Contact us today and we can go from there.
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