This is not an effortless task if you have a small team or run the
business with one or two people. Regardless, it is essential to monitor your
business performance and know all your business numbers.
For new or
small businesses, it becomes difficult as you are the one-man army managing all
things from marketing, sales, finance and products. But acquiring this
knowledge is worthwhile and really shows the direction your business is
heading.
Never run your
business on gut instinct.
You can measure
the performance of your business by these parameters
1) Sales
revenue
The first
number that should appear in your annual report is Sales Revenue. It tells you
how much money you have taken in from your product or service. Monitor it with
a year-to-year comparison of months, for example, compare March sales in 2021
to March sales in 2020. Product sales fluctuate throughout the year depending
on various factors such as climate, festivals, school/college exams, winter/summer
holidays, etc.
If you compare
it to consecutive months, one month may have high sales and the other may have
lower sales, which is influenced by external factors as described above and not
by your low performance.
2) Net Profit
Margin and Gross Profit Margin
Sales are of no
use to you if you don’t calculate your profit margin. To get this number, you
need to subtract your expenses from your revenue. It is the direct amount that
goes into your pocket.
Gross margin
shows how efficient your process is, or simply put, it shows your markup cost
on the direct cost of your goods.
It makes more sense to calculate Gross Margin
if you have a variety of products in your portfolio, as each product has a
different cost, and this way you can understand which product you should spend
more on to increase sales.
3) Net
Promoter’s Score
It is the scale
of customer satisfaction with your product or service.
Every company
has its own criteria to calculate it. Some companies give customers the option
to give a rating from 1 to 10 or 1 to 5, and nowadays you even see three
smileys to indicate the satisfaction level. Several company names came to mind
as I wrote this. As a customer, I often receive calls to rate the products I
consume.
As a customer,
it is sometimes annoying to respond to such satisfaction surveys. As a business
owner, one should use such techniques that do not irritate the customers.
But it is
important to have this parameter, as it tells you the overall customer
experience.
4) Converted
Leads to customers per month
Converting
leads into customers is a different ball game and requires planning and
efficient communication with your leads. It is therefore important to measure
your efforts and see how efficient you are and if you need to improve your approach
to this activity.
You do a lot of
little things for lead generation and invest a lot of time. Try to express this
invested time in monetary terms. For example, how much time you invested for
those 4 leads can be equivalent to the money you could have earned in that
time. Then compare it to the customer sales you converted. Remember that
everything in business is driven by money.
5)
Weekly/Monthly Website Traffic
It is an
unspoken imperative to have a good, authentic, seo-friendly website for your business
that you need to continuously maintain and update.
Monitor the
traffic on your website and the sources that generate that traffic. Plan your
actions and devote your energy to the sources that give you maximum results.
6) Social Media Engagement
This is another important
business parameter. However, few companies monitor this.
In this digital age, maximum time goes into creating content for your business
account on social platforms that can help you connect with your potential
customers.
Of course, it is necessary to measure this engagement. For some portals, it
depends on the social platforms how much data they show you, but in most cases,
you will learn the reach of the content, the number of likes, the number of
comments, how many people saved your content, how many shared it and so on.
Watch that traffic month by month aggregately and see if it‘s growing or
declining?
Iterate with different content and see which ones work better for your
audience. Put each month’s numbers on paper and visualize them, don’t just jot
them down in your head.
If you only sell through platforms like this, then you should compare the
increase/decrease in your engagement with the Customer Retention factor.
7) Customer engagement
This is again an important parameter to monitor how many customers have stopped
using your product and how many are joining. This helps you understand whether
or not your business is growing. It really is an accurate indicator of your
overall service, but it takes time to develop that maturity in the numbers it
represents.
8) Employee Satisfaction
Your company’s employees
hold a similar importance as your customers. Measure their satisfaction or mood
as it can directly impact your business success. They might add direct value to
your product, which will be affected if they are demotivated. Take extreme care
of their motivation.
9) E-commerce portal efficiency
If you are selling products on various e-commerce portals like amazon,
Flipkart, rediff, myntra then you should monitor this parameter.
So you can measure on which portal you are getting most sales and where you are
putting your energy. Since you can’t control the logic of portals, it is
important to understand which portal suits your product or what changes you
should make to your product content to suit a particular ecommerce portal.
If managed and studied well, this can be a game changer for your business.
At the end, there may be
several parameters, analyse which one shows the true performance of your
business. Measure such parameters, but be sure to collect good data before
concluding anything with such parameter. Numbers without good data points will
only show a skewed result, collect enough data that will give you a realistic
picture.
