In business you need to measure your marketing and sales efforts. For small businesses this is especially true. Small businesses need to make sure every dollar spent is bringing a good return. Without keeping track of the numbers you cannot know how your business is fairing.
According to a 2011 survey, State of The Business Owner, conducted by EMyth & Synotec, business owners who tracked metrics at least once a month were 80 percent larger, and earned 60 percent more than business owners who didn't.
The Basic Metrics
Every business needs to measure profit and loss. This is just basic business sense. You also need to know how many new customers you gain, and how many customers you retain. You also need to know how productive your employees are. This could be how much they produce if you're into production, or how much they sell each day if your business is retail based.
Return on investment (ROI) is an important concept for small businesses. You only have so much money so you want to make sure every dollar counts. Your marketing ROI is one of the most important metrics to measure. You can measure the effectiveness of your marketing campaigns several ways depending on the method you use.
- Split test email campaigns to see which one gives you more conversions.
- Track how many conversions result from PPC ads.
- Use coupon codes to track which coupons are redeemed.
- Track the links that lead people to your website. This will tell you where to focus your budget and efforts.
This isn't necessarily how much money your business makes, but how much each customer spends. If you find it is too low, you may consider changing your marketing tactics a bit. Try offering add on specials to up the revenue of each customer. Tracking this metric will help you to see how you can improve your customer revenue.
Break Even Point
As a small business the point at which you make a profit can be very crucial. For each project you need to measure man hours compared to completion time. Also track any associated costs. This will tell you how much it actually costs to complete a project or marketing campaign compared to the profits it yields.
So now that you have all these metrics what do you do with them? This is a good question. Data is only useful if you can actually interpret it and figure out how it can benefit your small business. Use your metrics to find areas of your business you need to change tactics or improve. If your email campaigns aren't providing the results you want, try tweaking the content.
Darrin Evans is a small business expert. His mission is to help small business owners learn what it takes to make their businesses successful. Darrin uses the free people search at Findermind to connect with other small business owners.