Something that business owners should always be doing is dedicating regular time to keeping track of the data in our business. But once you have your data and insights into your business, how do you use that to improve your business? The first step is being away of what key metrics you should be tracking in your business.
1) Sales revenue
How are you tracking your sales revenue? The first step is always tracking it and making sure that you have the data available in a way that gives you clear insights into your business.
Next, how is your sales revenue tracking over time? Are there trends? Identifying trends in your sales revenue could be a key indicator for knowing if your business is ready to grow.
2) Customer retention
Are you retaining customers well? Business have different needs for retaining customers – but for all businesses, some form of customer retention is key, and good customer retention means you might be ready to start playing offense and go for growth.
3) Cost of customer acquisition
You’re going to grow your business, but how much will that actually cost you? Have you optimised your customer retention system to minimise cost?
4) Operating productivity
If your business grows, there needs to be profit on the other end of growth. That’s where productivity comes into play.
5) Gross margin
Gross margin is the difference between revenue and cost of goods sold, divided by revenue. The better your gross margin is, the more beneficial growth will be for your business.
6) Net profit margin
The better your net profit margin, the more growth will positively impact your business. For some businesses, it might be worth putting systems in place to increase net profit margin before pursuing growth.
Tracking key business metrics is important for many reasons, but probably the most important reason is for your business’s culture. If your businesses metrics are heading in the right direction then it leads to a culture of success. This leads to an opportunity to celebrate your successes as you reach new milestones.
Remember you can’t control what you don’t track.