Trying to measure the success of a small business can be a highly subjective endeavor. But when you have the right systems and metrics in place, it becomes easier to track performance over time and evaluate big-picture trends.
4 Ways to Measure Your Success
Twenty years ago, small business owners thought to themselves, “If I just had enough data to work with, I could really grow my company.” Today, these same business owners have more data than they can handle. Yet many of them are still stuck in the same place: Misinformed, misguided, and in search of answers.
Measuring your company’s success requires you to look at the right data and block out the stuff that doesn’t matter (so that it doesn’t distract you from the important insights).
With that being said, here are a few tangible ways you can measure success in today’s business world.
Unless you’re running a non-profit where impact is more important than money, revenue is the ultimate measurement. More specifically, you want to see revenue growth.
Revenue growth can be measured in a number of ways, but it’s basically a running measurement of revenue on a month-to-month basis. (You may also track it on a quarterly or annual basis.) You simply take this month’s revenue and divide it by the previous month’s revenue. This gives you your growth rate.
For example, let’s say last month’s revenue was $20,000 and this month’s revenue is $22,000. You would take $22,000 divided by $20,000, which gives you 1.1. This means your growth rate is 10 percent.
Over time, you can track your growth rate on a chart. And while it’s normal for growth rates to slow down as the business grows, you always want to see an upward trajectory. Consecutive months with negative growth is a bad sign.
Revenue is a good indicator, but it doesn’t always tell the real story. Using the example above, it’s possible that you spent an extra $4,000 in advertising to increase revenue from $20,000 to $22,000. In that case, you actually didn’t make any more money – you made less. Thus, it’s important to calculate profit margin in conjunction with revenue growth.
As you know, profit margin is simply the percentage of revenue that’s left over after expenses are taken out. Thus, if your expenses on $20,000 in revenue are $10,000, that means your profit margin is 50 percent.
There’s no standard threshold for what a good profit margin is. It all depends on the industry, your products, your monetization strategy, and a long list of other factors that are unique to your business. Having said that, it’s a good idea to set a benchmark and strive for that number.
Net Promoter Score
Many small businesses avoid customer surveys because of the perceived complexity. And though there are certain types of surveys that require a ton of work on the front end, there are also plenty of simple ones you can deploy to generate quick and profound results. One of our favorites is the Net Promoter Score Survey.
Net Promoter Score, or NPS, is a very simple measurement calculation that’s conducted by asking customers a simple question: “How likely are you to recommend our business to a friend?” And depending on how they rate your business on a scale of 1 to 10, you’ll get a feel for who your “promoters” are, as well as whohow the “detractors” are.
Thanks to advanced NPS software, you can send these surveys out via email and get instant feedback from your audience.
While more subjective than a Net Promoter Score, audience engagement is another telltale sign of how you’re doing. In other words, how well are people responding to your brand online? Examples of engagement include:
- Blog comments
- Social likes and shares
- New followers on social media
- Email opens
- Podcast downloads
You always want to see growth in these areas. And for most brands, quality is going to be way more important than quantity.
Putting it All Together
Every business has its own unique flavor and audience. But if you want to get a quick finger on the pulse of your business (as it relates to success), the four measurements outlined above will help you get where you’re going.