What are you measuring in your business?
It’s July! How did that happen? In many ways it seems an eternity since the first of January – I don’t know about you but I can’t quite believe that half the year has gone already!
When I am working with clients I encourage them make sure they are monitoring the important metrics in their business. Why? Because if you are not tracking your performance how do you know what’s working or if you are on course for meeting your targets?
There is also the famous saying – “What gets measured gets done”. It comes back to accountability – and making yourself accountable to yourself (or to your business) even if you are not accountable to an external party. It’s easy to delude yourself that things are going well if you don’t have any evidence to the contrary.
If you set a target of 20 business development calls a week and then you don’t count them – then who’s going to know? But you will know at the end of the quarter when the sales figures reflect your poor performance.
Think of fitness, how many of you keep track of your running or cycling times – and are competitive to boot!? Or weight loss – how can you see whether you are on track if you never measure yourself?
So here we are at the halfway point in the year – how are you doing? Have you been tracking your business performance? You may call them Key Performance Indicators (KPIs) but the name is irrelevant.
What to Measure
What sorts of business activities or numbers do you track? Here are just a few ideas which you might feel inspired by if you are wanting to make a start:
• Number of customers (per day / week / month – depending on your business)
• Average invoice value?
• Daily or weekly sales targets?
• Number of Instagram followers or LinkedIn connections?
• Quotes sent?
• Conversion rate?
• Calls made or sent?
• Production rates?
• Wastage rates?
• Online sales – abandoned baskets?
What you measure depends on your business and perhaps even the challenges you are facing right now.
The point being – if you aren’t tracking on a regular basis then you can miss important trends. You do need to measure over a reasonable period of time too – you will get the odd blip or dip in data which can fool you into believing it’s a trend – I usually advocate tracking a particular metric for at least a quarter (13 weeks) to get a sense of how it’s moving.
Maybe the weekly number of enquiries is dropping – the danger is that you suddenly notice in 3 months time that you haven’t got enough clients – and it’s too late to remedy it. If you spot that the number of new leads is declining then you can send out an email marketing campaign, or a new social media campaign and start refilling your pipeline.
The opposite also applies – if you see numbers rising then you can make sure you have resources in place to deal with the rise in demand.It is also important to understand the difference between causation, correlation and coincidence!
Your average invoice value may be rising as well as the cost of petrol – but would you infer any relationship between those (a startlingly obvious example to make the point). However, you do need to consider what factors do influence others – and in fact, in the above example you might be able to demonstrate a relationship.
In Western cultures we are very prone to see causation where it may not exist. Politicians can make points based on nothing more than the behaviour of two datasets. In Far Eastern cultures it is much more usual to consider everything being interrelated – and for there to be much fewer direct causal relationships.
In your business it may be hard to see which factors affect which measures – but that does not mean you should not take note of trends. As well as measuring internally, it can be useful to look at external factors too – both micro (what’s happening in your industry, or within your customer base) and macro (what’s happening nationally or globally).
For example – there may be a trend to wear less casual shoes – how does that affect your footwear business? And of course a pandemic affects all businesses, as well as the threat of a climate emergency (it will affect consumer behaviour, whatever your own political beliefs may be).
How to Measure
Now you know what to measure – How are you going to do it? Larger businesses have systems in place which will gather information as a by-product of their operations – sales information, customer service stats, manufacturing metrics and so on. They can easily produce reports and dashboards with pretty graphics.
There is of course the danger that no-one acts on this information – but it is at least easy to produce. And with the advent of AI (artificial intelligence) big businesses are automating the decisjon-making. Who needs people?
As a small business owner you might find it harder to generate the reports – you don’t necessarily have the systems in place, and it can seem an insurmountable task to produce reports every week. The trick is to set up systems which will automatically collect data and generate reports – this is now far more accessible to small businesses – and you can do a lot with Excel spreadsheets. There are people out there who can help if it’s not your thing. Microsoft PowerBI will do the pretty graphs and dashboards for you too!
A Word of warning!
The head teacher of my children’s primary school used to say “Pigs don’t get heavier cos you weigh them”. Don’t congratulate yourself for producing lovely graphs or dashboards if you are a) not measuring the right things and b) not acting on the information!
So tell me, what are you measuring? Make sure that your metrics are relevant to you and your business – and make sure you understand their relevance – and what your action should be in response to any changes.
Let me know in the comments how you are measuring and which indicators you find most useful.
Get in touch if you would like to discuss further.