Starting a business is an exciting venture. When you first start out, you have a flurry of ideas around what you want your business to look like and who you want to serve. You do a ton of research on how to target your ideal customer and what types of marketing techniques are best.
Unfortunately, a lot of people get so caught up in starting their business that they lose focus (or forget to focus entirely) on what happens beyond their first day, week, month, and year.
The success rate for new businesses is around 80%. However, the rate at which businesses fail beyond their first year can be discouraging: 50% fail at the five-year mark, while 70% fail at the 10-year mark.
What’s the reason for these high failure rates? Multiple factors are involved, but one of them is not paying attention to small business performance metrics.
What are business metrics, and are some more important than others to pay attention to? Today, we’ll look at some key financial metrics for small businesses, as well as some digital marketing metrics that can help ensure the success of your business beyond Day One.
What are business metrics and why should you pay attention to them?
The first thing we question we need to answer is: what are business metrics?
Small business performance metrics are valuable sources of information that clue you into the health of your business. With them, you’ll be able to determine whether:
- Your business is growing
- How your employees and various departments are performing
- You’re investing in your business in the best way possible
- You’re getting a good ROI on your digital marketing efforts.
Performance components, like those listed above, are called key performance indicators, or KPIs. Key business metrics allow you to evaluate your KPIs regularly to keep an eye on where your business is going.
How often should you evaluate the performance of your business? It really depends on your goals and the size of your business. Some companies evaluate their metrics weekly, while others check theirs on a monthly basis. When it comes to your digital marketing efforts, you’ll want to evaluate at least monthly, if not after each email campaign.
4 small business performance metrics you shouldn’t ignore
As your business matures, you want to encourage its financial growth. To do this, you need to closely appraise some key business metrics.
Here are some of the most important business and financial metrics for small businesses.
1. Customer acquisition costs
What does it cost your company to acquire a new customer? To determine whether your marketing methods and business investments are actually good for your company, you need to see whether they’re providing you with a high ROI.
Ideally, you want to keep acquisition costs low, though the actual range depends on your business goals, business model, and the type of industry you’re in.
If you notice that your acquisition rates are rising—even though you haven’t launched a new product or service—you need to find out why immediately. This is an almost definite sign of trouble.
2. Operating cash flow
How is your company making money? What kind of funds are you bringing in?
It’s important to distinguish between making money via:
- Earning cash
- Selling stocks
Your cash flow statement will show you how your company earns money, as well as how much cash you have to reinvest in your business or simply put into your pocket as profit.
Ideally, your business is earning money without having to sell anything, such as stocks or portions of your company. If it’s at all possible, it’d be nice to avoid borrowing as well. Of course, sometimes these courses of action are inevitable, but, if at all possible, you want to take action to earn a good amount of real cash.
The only way you’ll know if you need to do that (and how to do it) is to regularly evaluate your cash flow.
3. Your company’s net burn rate
A net burn rate relates to how quickly your company loses money. Your general burn rate (GBR) is the total cost of running your business. The net burn rate is how much your company lost.
To calculate this, you subtract your costs, or general burn rate, from the amount of revenue earned. So, if you spent $500 on equipment in a given period and only earned $200 in revenue, your net burn rate would be $300. In other words, during that period of time, your company lost $300.
4. Customer churn (or retention) rate
Your churn rate provides you with important information that can have a huge impact on how you run your business and your marketing strategy. This metric tells you whether you keep all, most, or hardly any of the customers you initially attract. The churn rate also gives you insight into how you can nurture brand loyalty.
For instance, you might notice that you attract a high amount of customers but those customers don’t convert into loyal customers. If this is the case, you’ll need to decide whether you want to make changes to your products/services or to your marketing plan.
Making adjustments to your products or services can help you hold onto the customers that you initially attract.
What if you don’t want to change what you offer to your customers? In that case, you’ll want to focus on nurturing brand loyalty. You can keep the customers you already have around by setting up a marketing campaign appealing to their unique needs.
Digital marketing metrics vital to the longevity and financial success of your business
Digital marketing metrics can provide you with insight into why you’re seeing highs or lows in certain business/financial metrics. Therefore, digital marketing metrics is a key area to evaluate often. Here are some to consider.
Email marketing metrics
A vital part of any small and medium business (SMB) owner’s marketing strategy should be email marketing. In fact, nearly 60% of business owners view it as the marketing tool with the highest ROI.
Sending out random emails isn’t enough for this tool to garner results, though. You need to send content out that’s of value to your audience, and you need to do so consistently.
Additionally, you need to evaluate how well your emails are performing. You can do this with email metrics. You’ll want to keep an eye on the:
- Click-through rates
- Open rates (including those for mobile devices)
- Conversion rates
- Number of unsubscribes
- List growth rate
- Number of spam complaints
- Engagement rate
- Rate your emails are forwarded
- Revenue per email.
These metrics will expose the weaknesses and strengths of your emails. Based on these metrics, as well as A/B testing and segmentation, you’ll be able to make adjustments to your emails that’ll improve the ROI of your email marketing campaigns.
Social media marketing metrics
A great way to get your business onto the radar of your ideal customer is to show up where they’re most likely to be: on social media.
Social media marketing is an affordable way to market your business, but just because the cost is low (or even free) doesn’t mean you shouldn’t have a strategy for using social media platforms. If you don’t have a strategy, or evaluate whether your strategy is working or not, all of your time spent on social media will be for naught.
Therefore, to avoid wasting your valuable time and to get more from your social media marketing ROI, you should pay close attention to the metrics provided by these platforms.
Each platform has a metric system that’ll show you which posts are performing the best. Based off of these numbers, you can switch up your strategy (if necessary) to reach even more people and/or appeal to your target base.
Your website is a vital component of your overall marketing strategy.
A company website is something that should work for you, not simply be some static entity on the internet. By updating your content regularly, you can start to see a good return on your investment. Updates can encompass:
- Making changes to landing pages
- Posting blog posts regularly
- Adding video content more frequently.
Of course, once you’ve done all that, then you need to monitor your progress. Some metrics to monitor:
- Website traffic
- Traffic sources
- Bounce rate
- Overall conversion rate
- Conversion rate by specific traffic sources.
Tools that can help you evaluate these metrics include:
- Google Analytics
- Crazy Egg
- SEM Rush
Small business performance metrics give you the opportunity to evaluate the health of your business. Doing this regularly allows you to make adjustments to your goals or how you go after your goals. It’s important to assess the performance of these key business metrics:
- Customer acquisition costs
- Cash flow
- Churn rate
- Various digital marketing metrics.
As an SMB owner, you want to ensure you’re successful beyond your first year of business. You can ensure prosperity and longevity by regularly evaluating your financial metrics.
Email marketing can help ensure your company’s success. Check out our guide for creating an email marketing campaign that will help you achieve your marketing and financial goals for 2019.