Measuring performance of your solo business
Business metrics provide important information about the performance of your business. But which statistics reveal most for solo business owners – and especially those just starting up?
Google Analytics gives you information about the number of hits your site has received, where they have come from, whether the site is being accessed from a computer or a mobile device and a number of other measures. Facebook, Pinterest and LinkedIn report on your connections, likes and shares, while Twitter shows you re-tweets and mentions. Online advertising metrics show you the number of people who click on your ad, and the amount of those who then go through to your website.
The problem with all of these online measures of success is that they don’t directly reflect the revenue generated in your business. No matter how many contacts, likes or shares you have, until those people actually purchase something from you, they are just numbers to a small-business owner. Only when these statistics are compared against revenue, profit and customer numbers can their true success be measured.
If you can show that a particular Facebook ad or LinkedIn post sent people to your site, that they then made a purchase from you, and their purchase was specifically as a result of the ad or post, you have a statistic that is an actual measure of effectiveness. New customers (not just new website visitors) gained from these measures is another good statistic to know.
"No matter how many contacts, likes or shares you have, until those people actually purchase something from you, they are just numbers to a small-business owner. "
Again, the number of leads a particular campaign generates is not anywhere near as important as the number of new customers generated, or an increase in revenue that can be attributed to the campaign.
Marketing needs to be measured carefully, as inaccuracies can often arise. For instance, gains that are received from a campaign can easily be offset by losses later on – a customer might buy twice as much of an item while it is on special, so they don’t need to buy it at full price next time.
The success of a marketing campaign will depend on the success of lead follow-up. It’s no good if you have a cracker of a campaign, but then customers are lost or put off by poor follow-through or bad customer service. It’s important, then, to look at the reasons for leads being lost after a campaign, rather than just the numbers. It’s only then that measures can be put in place to improve the retention rate in the future.
Want more articles like this? Check out the measuring success section.
Your Profit and Loss statement gives you the profit (or loss) of your business over a specific period of time. A separate Cash Flow statement gives you your cash position; that is, whether you have sufficient cash to cover your short-term debts.
Both of these reports are available in most accounting software programs, but beware – they are only as good as the data entered. If you have trouble keeping up with your bookkeeping, the figures your reports produce will be wrong.
The metrics mentioned here are but the tip of the iceberg when it comes to measuring success. As your business grows and matures, you will need to look more deeply into metrics to get a handle on the position of your business. But at start-up, and early on in your business, the ones mentioned above should give you sufficient data to track your success.
What are your tips for measuring business performance?