How You Can Measure the Success of Your Small Business
If you have a small business that’s been around for a while and is preparing to scale, or even if you’re just getting started, it can be difficult to figure out if your company is actually growing, or if it’s started to plateau. How do you quantify and measure the success of your venture? What metrics matter? There’s a lot more to look at than just your earnings, and it’s important to consider other perspectives that might not be on your radar if your business is new.
Here are 5 different ways to measure the success of your small business or startup you may not have considered.
1. Follow the Money
The first thing that most people think of when they think of measuring a small business’s success is the company’s finances. However, it’s not as simple as just looking at your monthly profits and calling it a day. Rather, there are three different financial statements you want to consider: your income statement, your balance sheet, and your cash flow statement.
The income statement (also called a profit and loss statement) is the first place to get started. It’s a way to measure the profitability of your business over a specific period of time. Basically, it shows you how much money is coming in and going out. Usually, you want to look at it over a few different time ranges: by month, by quarter, and by year.
A balance sheet takes a broader view of your business or startup to give you a big picture view of the situation. This document should capture all the assets that your business owns, any debts you might owe, and track you and your partners’ investment in the company. This statement gives you a better idea of the long-term sustainability of your small business.
A cash flow statement is a little different than an income statement because it’s looking at how many of your assets are liquid at any given time. You might have made a ton of profit in the last quarter, but if those client invoices are still outstanding, you can’t use the money you’ve actually earned. Liquidity is important because you might need to reinvest that money in inventory, marketing spending, or paying down debts to keep the doors open. It’s a good idea to have a clear picture of your cash on hand if you’re thinking of making a move, expanding, acquiring another business, or recruiting new hires.
2. Listen to Customer Feedback
Cash isn’t the only way to measure success for your small business. One sure sign that you’re doing well and might want to think about what comes next is overwhelmingly positive feedback from your customers. The most important and valuable marketing is by word-of-mouth, and if you’re already generating that kind of enthusiasm it’s important to actually be in a position to recognize your success and capitalize on it.
That means including customer feedback as something you look at when you’re trying to take stock of where you are. How you collect it is going to depend on what business you’re in— anything from focus groups to online reviews can be helpful. The main thing is to make sure that it’s something you’re paying attention to.
Another thing to look at with customer satisfaction is what your retention numbers look like. Customers who keep coming back year after year are probably extremely happy with your product or service, and that means they’re just waiting to be activated as champions for your brand. Strong retention numbers also mean that you have staying power as you have a nice floor for numbers you can count on. Plus, it is cheaper to upsell current customers than it is to acquire new ones, so a focus on retention is good for your bottom line in the long run.
3. Employee Performance
Businesses often underrate the resources they have on hand. One of those resources is your team: the people who keep the trains running on time. If you have a great team that works well together, you’re well on your way to creating a startup or small business that will make a difference. A lot of companies do performance reviews for their employees, but the important thing to realize is that these reviews are also an evaluation of the company culture. Your team is the thing that nobody else has, so make sure that you’re taking a close look at what it’s really worth.
4. Peak Business Hours and Traffic
If you’re thinking about making a move to expand or boost your business, you should also look at what your peak traffic and hours look like. For one thing, you want to know what your numbers might look like if you really take off, and whether or not you’ll be able to handle the extra workload. For another, taking the time to really take a close look at what drives your traffic and why that might be the case can help you come to some realizations about what factors feed your success. You can use these insights to make decisions about which direction to go in as you build your business for the future.
5. Do a Checkup on Your Mailing List
The fact remains that your email list is still by the far the most useful and actionable way to cultivate and convert leads. As you’re evaluating where your small business or startup is right now and its potential for growth, one thing you want to pay special attention to is your list health. How recently have you done housekeeping on your email list to get rid of duplicate entries and old email addresses? If you’re not careful, you can pretty easily end up in the spam folder.
At the same time, having a healthy list is different than having an effective email marketing strategy. While you’re taking a close look at your numbers, pay special attention to where your strengths and your weaknesses lie. If you have a strong open rate but a below average conversion rate, you probably need to do some A/B testing to figure out how you can improve to better serve your business.
What You Can Do Right Now
When you’re looking for ways to measure the success of your small business or startup, it can be hard to know if you’re evaluating the right metrics. Other than the financial picture (which is incredibly important), you also want to take stock of other factors as well. Here’s what you can do right now:
Look at your income statement, balance sheet, and cash flow statement to get a multi-dimensional picture of your finances.
Solicit customer feedback, and make sure it’s a part of your review process.
Remember that employee evaluations are also a reflection of your company’s success.
Use peak traffic numbers to generate new insights about your customers.
Evaluate your mailing list to make that it’s healthy and doing its job.
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