Small Business Metrics to Watch
If you are the owner of a small business, then you likely already realize how much there is to consider when operating a company. Trying to evaluate your success can be very overwhelming, but the practice of focusing on certain key metrics can help you keep a close eye on your strengths and weaknesses and will help you drive your business initiatives in this right direction.
Guide for All There are hundreds of different metrics that can be measured and considered when evaluating a business and some companies will track a large percentage of them, but for there a key few that provide a clear picture all on their own and they can be applied to any business – big or small and regardless of the industry. These are five metrics to regularly measure.
1. CPA Standing for ‘Cost Per Acquisition’, this is a direct comparison between the number of new customers acquired and the capital spending needed to maintain the current marketing objectives. Calculate those costs, including associated labor expenses and divide it by the number of new customers in the same time range and you can have a pretty good idea of whether or not the marketing is paying off. This figure can be slightly misleading at the start of any new campaign, but over a longer term, it can tell you a great deal.
2. New customers and clients can insinuate new growth, but if those customers buy only once, then it might not be as promising as the owner once thought. The Loyalty of the Customer is most easily measured by actual customer input. Surveys and questionnaires are very beneficial for this reason. They can be performed over the phone, web, email, or even via snail mail. Will the customer return again? Will he or she refer you to a friend or family member? Word of mouth is very important in any industry.
3. Average Revenue Per Customer In order to figure this out, simply determine the total revenue for a specified period of time and divide that by the number of customers that the company was serving during that same period of time.
4. After the Revenue per Customer has been determined, it can be used to gain further understanding of a customer’s worth to the company. Lifetime Customer Value compares that to the cancelation rate (the number of customers that cancel their account during the same period of time). It is this number that, over the long term, will show how much the company stands to make for each new customer it attracts.
5. So, you will begin to understand how much money customers represent, but is that flow cover the expenses? This question is often best answered by watching cash flow monthly. How much money was in the account at the start of the month? What was there at the end of the month? The number may not look good in the short term, if investments were made in new equipment or new marketing measures, but continually tracked, the Cashflow does demonstrate how funds are being managed.
Companies Online This heading should not be misconstrued to mean those companies that sell exclusively online. Instead, it speaks to any company marketing and/or selling their products via the internet. Fortunately, services like Google Analytics do this sort of tracking for you, so all you have to do is analyze the data.
1. Bounce Rate is the percentage of customers that leave the site after viewing just one page. The higher the bounce rate, the less likely it is that new website traffic is translating into new sales.
2. Pages Per Visit is a tool that offers a slightly better picture of what visitors are doing. Even if the bounce rate shows some promise, if the average user is only seeing two pages before leaving, then it can point to problems that need to be addressed.
3. Average Time on Site is pretty self-explanatory. Like the rest of these online metrics, this is tracked by services like Google Analytics and can provide some insight into how the potential customer views your site.
4. % New Visits is simply a measure of how many visitors to the site were there for the first time. It is a good representation of how brand recognition is expanding.
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