“What gets measured gets managed,” said management guru, Peter Drucker. I believe that if you measure the right numbers in your business it helps you understand your business better. Measurement is the first step to control. Process control expert, James Harrington says, “If you can’t measure it, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”
There are 5 key business metrics you should focus on when it comes to measuring your business success and progress. Timelines can vary but I recommend that you measure this on a weekly basis especially if you’re just starting to grow your business.
Here are the 5 Business Metrics:
There are some measurements that may not apply to you. For example, if you don’t have a renewable membership program, there is no recurring revenue for you. If you have just one marketing channel set up or no channels set up, you might not have new visitors or prospects.
But in general, these are the five numbers that, if you chart them in your business you should have a clear pulse of your business. You will always be able to know that you’re making progress.
The 5 Key Business Metrics I measure:
- Total Revenue. This is the amount of money that your business generates.
- Number of Clients. How many active clients you are currently working with? For example if you are an accountant it could be number of clients you are currently doing audits for and other projects.I always like to bifurcate between revenue I get from new clients and existing clients. Typically I want to increase the amount that existing clients spend with me. I want to sell more to them or sell them more frequently.The research shows that the probability of selling to an existing client is between 60-70%. While it is only 5-20% for a new prospect.
- Number of Subscribers. This is the number of subscribers who have signed up on your social media platforms, website and your email list. These days every entrepreneur needs to utilize social media as a marketing channel.The number of subscribers you have is a good indication of your level of influence. These days it is imperative that you are growing both your social media channel following and your email marketing list.Typically I’m looking at the following numbers:
(a) Website users and page view through my website’s Google analytics.
(b) The number of followers on Twitter, Instagram & Facebook fan page. If you are active on other social media platforms then add those in your measure.
(c) The number of active email subscribers I have on my list. Active are the ones that have at least opened my emails.
(d) My most popular blog posts and videos every month. This gives me an indication of what my audience likes so that I can produce more content that they like.
- Value Per Customer. This is essentially the value or revenue that you earn from every customer on an average of 12 months. My goal is to look to increase this.Essentially I look to either sell more to existing clients or get clients to buy more frequently. The If you can provide a product or service that your clients can buy from you regularly on a monthly, quarterly or annual basis is the most valuable revenue for your business. This brings me to the fifth and most important measure.
- Recurring revenue. This is revenue that is generated from some sort of subscription or membership program. Your clients may buy from you monthly, quarterly or annually. This is regular and predictable revenue for your business. Recently the Dollar Shave Club, which provides disposable razors through a monthly membership program sold for US$ 1 billion. The reason it was able to command such a premium price was that it had predictable cash flows because of its recurring membership program.Having a recurring revenue can generate a valuation multiple of more than 15X revenues. A similar company with similar revenues, but without recurring revenues may only command a revenue multiple of 2x revenue valuation.Given that the market values companies with recurring revenue far more then it is important not only to create products or services that can be sold in some sort of subscription package, but also have a key measure of success.Finally, I suggest that you have your key numbers on a dashboard which is easy to view and understand. I highly recommend the following software for your business intelligence dashboards: Cyfe.com. Try it out for FREE. You will be able to connect it directly to your Google analytics accounts and most social media accounts so that it is able to pull data directly into your dashboard. For a 20% discount, if you decide to go for the paid premium version please use the code: NEERAJSHAH.Which data do you track regularly? Leave a comment below.