In just the past five years, the successful measurements in marketing and sales for small businesses have changed dramatically. For larger brands, it has changed just as much. It’s fair to say that many small businesses, maybe even yours, might not understand what metrics are important to measure.
There have been numerous stats that small business owners track to indicate success. But, behind every metric is an even larger story. Marketing statistics can tell a great story as to the health of your business. Likewise, they can help you (and investors) uncover ineffective sales and marketing activities for your business. The landscape of small business metrics is vast because you have so many to track: website analytics, social media analytics, conversion rates, email performance, funnel analytics, sales metrics, service costs … and ultimately, revenue and expenses. If you were to list all these on one page, you would need an 80-inch monitor and display them at a size 12 font. It’s pretty overwhelming for most small businesses.
Knowing what metrics to track and measure depends on knowing what question you are trying to solve for. Data is impartial. But the person collecting or presenting the data often has some type of bias. I mean, you wouldn’t want to see metrics if they are pointing out a problem. In any data representation, there ought to be a story you are telling around it. This is where some reporting dashboards fall short because they only show the number and not the activities around it. That is, if you’re only tracking the page views that your blog earned, you need to take a look at the bigger picture of how page views relate to the success of the business.
It’s always about providing context. You should examine the varying time periods on a specific metric. Whether that means 30, 60 or 90, days; or it could include years of data in aggregate. These different sample periods all tell you slightly different stories.
So, which stats and metrics help you move the business forward? At a high level, these are the universal metrics that apply to many small businesses:
- Cost of Goods Sold
- Customer Acquisition Cost (CAC)
- Lifetime Customer Value (LTV)
- Ratio of LTV to CAC
- Customer Retention
There are several more metrics that are very valuable, but the above metrics help you get to the point regarding the health of your business.
For instance, if your next car purchase is aimed at having the most horsepower and torque, you will probably neglect looking at the gas mileage. Making a decision based on any one metric will ultimately cost you. And your business isn’t much different. You need to look at a variety of metrics across your entire business in order take the right action.
Recently, I’ve seen many marketers become occupied in vanity metrics. What are vanity metrics? These are metrics that you would typically share with others to look better. They aren’t actionable and only tell one chapter in a business’ story. A classic example of vanity metrics are Facebook Likes. If you’re not sure, ask yourself, “How does this metric put cash in the bank?” Last time I checked, you can’t pay your staff with Facebook Likes.
… But again, this requires context. If you did a great promotion on Facebook (perhaps by using GroSocial, an affordable social media marketing application), and you were able to generate qualified leads or sales from those Likes, then and only then, Facebook Likes become a great indicator of success.
Stories aren’t fiction or lies –at least we hope not. Stories help others understand the meaning of a metric. Stories aren’t excuses, either. In fact, if you are tracking your metrics, maybe even obsessing about them more than others, you will be in a much better position to give context and leadership to achieve your goals. For instance, if your business is spending more cash than it takes in, then there should be a sound reason for this and a clear and confident plan as to how you become profitable.
Measuring the health of your sales and marketing activities is incredibly important so you can take action. Business doesn’t just happen; you have to go out there and get it. Once you have the right metrics that reflect the activities of the business, you now have the fun (and challenging) task of making tweaks and improving. It doesn’t just mean collecting more revenue or weaning off your expenses; it’s about taking decisive action around investing in the right parts of the business. In essence, knowing the right metrics helps you confidently make the right investments at the right time.
Here are some generalized suggestions to think about:
- If you are getting leads, but not customers, you might want to invest in a salesperson.
- If you are getting customers, but not leads, you might want to invest in a marketing professional.
- If you are getting leads and customers, but they are leaving quicker than they come in, you might want to invest in a customer service professional.
- If you are not retaining your staff and they leave quickly, you might want to invest in a recruiter and improve your company culture.
All these suggestions (and implicitly, larger questions) require you to look at the big picture of what moves your business. It’s not only revenue and expenses. It’s not Facebook Likes. It’s the entire picture and you want to track the metrics that indicate success for your small business. Not everyone was born with accounting skills, so hiring an accountant will really help you stay on top of your books and can alert you when “things don’t seem right” before you need to take immediate action.
We recently published a great e-book that goes much more in-depth explaining statistics and conducting your own customer surveys. Customer surveys help you listen to customers and improve your business. But again, it all starts with asking the right questions. Download Customer Surveys: How to Raise Your Sales & Marketing IQ in 6 Easy Steps to become a master at customer surveys.
Do you have any tips for our readers on framing metrics around your small businesses goal? Leave them in the comments below!
Image credit: Ken Teegardin
This post Are You Measuring Your Sales & Marketing Metrics Correctly? was first published on the Big Ideas Blog.