You shouldn't judge a book by its cover - or a business by the number of customers coming through the door. That's because the health of a business is not always obvious at first glance. There's action behind the scenes, so there's always more to tracking business performance than meets the eye.
There is no exact science, but there are different metrics or tools you should be using to ensure that your business is fit and healthy. Track the following five metrics, and you'll be well on your way to understanding your business better.
Metrics to track
Your business attracts customers - that's step one. Step two is making sure that those customers come back. A critical part of doing business is increasing the number and value of sales to established customers. Do your customers recommend you to others?
There are a few ways to determine customer loyalty. You can ask them in a survey, they can tell you, or you can use performance analysis. Whatever your method, you need systems in place before the customer walks in the door. Tools must be utilised well in order to give value.
It's important to know whether your customers feel loyal to your business. But are they retained? Calculate how many customers stay with you and how many leave, as percentages. If you do this across multiple time periods, you begin to see the bigger picture.
The rate at which your customers leave is called the churn rate. Your business, ideally, should have a high retention rate and a low churn rate.
Qualified leads per month
As you spend more money on advertising, you expect to see many new leads, but it's not enough to get a customer interested. You need to get the right customers - customers who will buy.
If you can measure the number of business leads as well as the changes in your sales, you can see whether you're attracting the right people, or if you are missing your audience. This maximises your chance to attract the right customers, and spend your adverting budget well.
It should be obvious that an employee who feels supported and valued will work harder, and that your customers pick up on employee moods. The reverse is also true - don't underestimate the power of negative perceptions.
Regular surveys can be a good way to check in with the state of the team, but there are other metrics and tools that can collect valuable data. Advice from Human Resources or employee satisfaction applications are also options.
Return on Advertising Spending (ROAS)
A good rule of thumb is to spend money as an investment, not to throw it out the door and hope. Advertising can be costly and should produce positive outcomes. If you divide the sales you've generated through advertising by the spending itself, you get your ROAS.
If spending is lower than sales, something you did worked. You'll need to scale it back to understand which audiences or methods of advertising were the best investments for your business.
Don't risk learning you're in a tricky situation too late. Keep an eye on how your employees are feeling. It affects their performance, and it affects your customers and reputation. Likewise, keep an eye on customer satisfaction. What's the retention rate? Also, use metrics to see whether your advertising is well invested and connecting you with your target audience.
Use business performance metrics to keep your fingers on the pulse of your business. If you use the right tools and measures, you can make better business decisions. This ensures your business stays healthy.