Monitoring business success can be difficult. But if you want to set your company up for short and long-term achievement, it’s absolutely necessary.
A successful business requires honesty. This means knowing how profitable your business is and how much money you’re putting out each month.
It also means keeping track of trends and anticipating where the market will be this time next year. Keeping ahead of these things can mean the difference between your business staying healthy or it being in danger of failing.
In this article, we’ll look at how to go about monitoring your business’ success.
You’ve heard it before, but business is truly all about the money. If you aren’t generating profit, you won’t be running a company for very long. So first and foremost, you should be monitoring how much money is coming in versus how much is going out.
Depending on the size of your company, the tool you’ll use for this varies. Small businesses can use simple tools like Quickbooks or even good old pen and paper. Larger businesses will benefit from larger online software or tools (like this MRR calculator).
Of all the numbers to monitor, profitability is number one. Cash is like oxygen for any business—it keeps it alive.
Digging deeper into the numbers, the next success indicator you should look at is the success you find inside your business revenue. Trends can give you solid information about how your company is either thriving, surviving, or even just managing to stay open.
Trends to keep in mind include:
- Where your sales are coming from
- Which quarter of the year performance is best
- Which employees are converting these sales
- Which marketing efforts are leading to the most sales
Basically, figure out the who, what, when, where, and why. It sounds simple, but these trends can provide valuable information for your business.
Identifying trends can allow you to apply the Pareto principle, also known as the 80/20 rule. This states that 80 percent of your success comes from 20 percent of your actions—which means you might be able to hone in on a few key strategies or trends and make more money in the future.
If there’s one trend or marker that you should be keeping track of, though, it’s how well you’re converting.
Conversation rate refers to the number of customers you sell to relative to how many you tried to sell to. Whether your business is conducted face-to-face or in an eCommerce setting, your conversion numbers provide vital information about your business success.
Here’s why: converting at a higher rate lowers your customer acquisition costs. This allows you to bring more new business through the door for less money, lowering expenditures, and elevating your overall profit.
It’s worth taking the time for any small business to figure out exactly where the money is coming from, and how often.
For example, you could discover that 50 percent or more of your business comes from one or two clients. This is great if it pays well; but if those clients go away, what will you do?
Let’s call your ability to make a sale and stay profitable as a business “effectiveness.” Now ask yourself: have you considered how efficient you are at performing these tasks?
Business efficiency refers to how much work you put into producing one “unit” of worth in your company. That unit probably refers to a sale, but could also be in reference to other things such as lead generation.
Say it takes you four attempts to create one sale. With a few simple tweaks or streamlining of processes within your company, you could cut that time down to one in two. Think about how much extra money that would bring in.
(Not to mention how much extra time you’d have to devote to creating new business.)
Sit down with managers and assess how efficient your process is. Or take the time to audit your business’s money-making “engine” by asking tough questions about how it actually gets done. Then ask the real question: how could you do it more efficiently?
It’s easy as the owner of a small business to get wrapped up in the numbers. Just don’t forget that humans lie on the other side of those numbers.
Understanding who exactly is doing what in your company is essential. Whether you’re an online business or sell your goods in person, having that data in front of you can help you make powerful decisions about your company.
For example, is there someone really overperforming? If so, could you give them a raise?
What about an employee that isn’t performing? Or what if an entire team or wing of your company isn’t doing the job you thought they were?
In the same way that any important change is made in life, knowledge is the first step. Once you’re aware of the problem (or advantage) that you have, you can take steps to solve it.
What Does Business Success Look Like?
Business success varies for each company. But since everyone’s goal is to turn a profit, there are some universal commonalities. Start with these when you’re determining the health and vitality of your company.
First and foremost, figure out your level of profitability. Then dig deeper into the numbers and identify the trends that are getting you there.
Once you have the hard data, draw conclusions on how you’re getting there. At that point, you’re free to ask the hard (but empowering) questions about your business.
Can I make this more efficient? Can I promote the best talent I have? Can I double down on a strategy that’s already working?
With the right knowledge in front of you, the answer is yes.
For more tips on running your small business, check out our blog!
Mashum Mollah is a tech entrepreneur by profession and passionate blogger by heart. He is on a mission to help small businesses grow online. He shares his journey, insights and experiences in this blog. If you are an entrepreneur, digital marketing professional, or simply an info-holic, then this blog is for you. Follow him on Instagram, Twitter & LinkedIn