During a lecture in May of 1883, William Thomson, the Scottish physicist more commonly known as Lord Kelvin was quoted saying…
“I often say that when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind”.
And it is believed that this speech gave rise to the notion of “what gets measured gets managed” which was widely popularized by perhaps the greatest expert on management of all time, Mr. Peter Drucker.
Which brings us to today’s discussion topic appropriately entitled, “Measure as much as you can in your small business. Why? To see what works and what doesn’t…so you can cast off quickly what doesn’t.
Small businesses suffer and are victims of shortages – one of the greatest of which is resources. As a small business owner, you have to have laser-like focus to do what you need to keep your company running, and moving forward successfully. You generally don’t have the luxury of abundant resources – so if what you do have is scarce, then time and energy cannot be wasted on, or dedicated to unproductive activities. And how do you know what is productive and unproductive? By measuring it.
You need to put together a list, or some people call it a “Dashboard” of the most important items to the success of your business. Every business is different, and clearly choosing what to measure is part of the exercise and the future value you will derive from it, but there are a few things that no matter what type of business you’re in, must be tracked.
- First off, the obvious one: Revenues. The key though, is determining to which periods of time do Revenues need to be tracked and compared? More specifically: versus last year, or versus previous month, or previous quarter, and/or versus your projections or budget. Now all of this presupposes you have this data – which in the case of many small businesses, the answer is ‘no’. So use your new Dashboard now as an impetus to track at the most basic level, those revenue periods you can realistically monitor. If it’s only one (i.e., yearly) that’s fine, but at least combine the yearly revenue tracking to a budget so you have one more number by which to measure your company’s performance. You’ve got to start somewhere, and this is as good as any for your small business.
- Next: Profitability. Call it EBITDA or Net Income, or just “Profit” but you must measure whether when it’s all said and done, is any money left over? The other questions relative to this include: How much, what % of sales is your total profit, and how does it compare to each of the numbers in the periods you established in Step #1 above?
- Next on our list: Customer performance!
- How many do you have?
- Using the old 80/20 rule, what % of sales do the Top 5 comprise? Top 10? Top 20?
- Which is the most valuable, i.e., meaning it generates the most Net Income (bottom line) for you company? It’s clear here, this is where you need to be spending quality time, and focused energy and support (which generally means ‘money’).
- Which are the most unprofitable? Is it time for some serious conversations about resource allocation and with whom your sales personnel should NOT be spending their precious time? Think about it, and remember the age old adage “time is money” and that holds true for all.
- How many potential new Customers or deals are in the pipeline?
- What is your conversion rates?
- What is the length of time to get conversion?
- What was your close ratio over the period in question?
- And lastly, try breaking measurements down into smaller groups, regions, territories, product categories or service offerings, to give them more relevance and easier to understand and ultimately act upon.
- And lastly, your Digital strategy – this may be the easiest thing of all to measure, given the ease of access to digital analytics. The key, for you Mr. or Mrs. Small Business Owner is simplicity and relevance. So examples of some metrics to include for measuring and tracking the basics are:
- Website traffic:
- Unique visitors
- Number of impression
- Click through rate
- Newsletter open rates
- Geographic profile of visitors (East coast vs. West, Florida versus New York, etc.)
- Most shared content?
- Clicks on “Call to Action”
- Top keywords?
No matter what metrics you choose, stick to the script: simplicity (for ease of measuring and tracking) and relevance. It must be important to your business, otherwise, why measure it?
Based on your findings from analyzing your key metrics, put together a list of “wins” or “what went right?” and another list of “what went wrong?”. Put in place additional processes or resources to support your wins, while at the same, mercilessly abandon the things that went wrong. Remember, as a small business owner, time, energy, and resources are so scare and valuable you have to be cold blooded and only do what guarantees success and your ultimate survivability. So focus intently on your wins, and abandon coldly your failures, but chalking them up to experience.
Your metrics, no matter which ones you choose, must be important to you and your business. It doesn’t matter if they are important to Jeff Bezos or Warren Buffett (well, maybe it does a little…) – they have to be important to you, the employees in your company, and to the overall success and survivability of your enterprise. Choose wisely, making sure you are measuring and valuing only those things most important to you and what you understand from your metrics, will continue to drive that success.
I wish you luck in great measure throughout 2019 and beyond.