Establishing Key Metrics in Your Business
The very first thing to do before plotting a course for growth is to set up the key metrics of your business. "Metrics" are basically crucial statistics by which you can measure how well your business is performing.
Among the key metrics to consider are money-related metrics, customer-related metrics, product development-related metrics and team- and operations-related metrics.
For example, a customer-related metric might be, "Conversion rate of Web site visitors to purchasers." Is 5 percent satisfactory or do you need a higher number like 15 percent to generate the revenue you're seeking? Knowing this metric may enable you to make adjustments to your online strategy that could be very powerful to your business.
A financial metric might be something like, "Monthly cash flow." You may need to achieve and maintain monthly profitability by end of Q2, for example, and if you don't, you may have to reduce your spending until the situation is rectified.
Or how about an operational metric, focusing on inventory turns? This is all about how quickly you move product out the door. Knowing this will help you understand how long you can expect your money to be sunk in merchandise instead of being available for other business activities, like meeting payroll.
Critical aspects of creating key metrics include:
- Choosing those things that have a significant ripple effect on the performance of your business.
- Ensuring that the metrics are measured over time.
- Having quantifiable measurability so you can be sure you understand whether or not you're performing.
So ask yourself:
- What is consuming most of your revenue?
- What is bringing in most of your revenue?
- Are there areas where things can be done more efficiently?
- Are you spending time on things that can be delegated?
- Are there additional revenue streams that you are missing out on?
- Are there projects on hold that could be increasing your revenue today?
Assisting small business owners in understanding where they can be more productive, both in bringing in revenue and working ON their business and not IN it, are services that we are happy to provide. Contact us today for a consultation.
