Running a small business is not for the faint-hearted, and many owners reach a point where they are simply trying to avoid closure. To measure business success, start by tracking clear, consistent metrics tied to your goals, such as cash flow, the number of clients you are reaching, cost reduction efforts, employee performance, website traffic, and progress toward specific targets. For small business owners, startup founders, and managers, these numbers make it easier to judge whether the business should remain open, await a turnaround, or close up shop.
Success has different and similar standards globally, which is why measurement needs to go beyond instinct. In small businesses and startups, the most common business measurements are the rise and fall of cash flow, the number of clients being reached, and cost reduction efforts, but useful assessment also includes goal tracking, performance reviews, indicators of growth, and even factors such as company culture and eco-consciousness. By using data and regular reporting, you can see whether the business is moving toward the results and values that matter to you.
Start thinking in business performance metrics
The fundamental starting point of measuring success is to start thinking in metrics. To effectively measure progress, you need the right success metrics and key performance indicators (KPIs) aligned with business goals and strategic objectives, supported by clear metrics and strong data collecting and reporting tools. Without the numbers, you are merely making assumptions.
Tracking metrics data is a conditional measurement requiring constant and consistent attention. When tracking success metrics, balance leading indicators with lagging results so you can make informed decisions.
Setting measurable targets is an excellent way to monitor your success, but it requires experience and business acumen, and using SMART criteria helps define specific, measurable, achievable, relevant, and time-bound key performance indicators. Tracking too many KPIs can dilute focus, so regular reviews help keep metrics tied to business objectives and business priorities. Consider these points when setting targets:
Are your sales affected by seasons? For example, tourism peaks over long school holidays, toy sales at Christmas time and temperature regulation devices in summer time.
Legislation changes tend to see upticks in turnover for tax, finance and legal professionals. Health & Safety legislation could see an unusual peak in sales for new equipment like PPE.
A new product launch often pushes up the sales of existing products due to the increased marketing. These would be anomaly sales and not a new level.
What are the year-on-year patterns? Use historical data to track performance, spot trends in business performance, and ask whether there is a trend indicator to explain the increase or decrease. Can you replicate the circumstances that had a positive effect?
What is business success?
Your values will build your unique business culture, which will require some unique success metrics amongst general metrics. Values aligned to your purposes, goals, and overall business strategy create a business value system that feeds into your business success measurements.
How you measure success is based on values and goals. Without having that knowledge established first, your metrics for success will be unclear, and the resulting data won’t help your strategy. Success measures should balance quantitative and qualitative indicators across different business functions.
How to measure business success with key performance indicators
Here are some great ways to measure your business’ success.
Reports
The progress to goals can’t be measured without reports tracking your business data, financial performance, and overall financial health. Try to keep your dashboard ultra-focused on 5 to 8 key performance indicators.
Useful report metrics include cash flow, operating cash flow, revenue growth, net profit, net profit margin, gross profit margin, and profit margins to monitor the revenue generated by the business. Startups may also report on burn rate and cash flow forecasts, while subscription businesses may track monthly recurring revenue. The process is lengthy and requires lots of attention from you, but the return on investment (ROI) is multi-faceted and helps guide investment strategies and resource allocation.
Employee Performance
Finance measurements are only part of the bigger picture of measurements and only one part of business growth. Employees’ performance needs regular motivation, and a related success measurement can be done via employee performance reviews, employee satisfaction, and Employee Turnover Rate, with a low rate often signalling a strong company culture and operational stability.
Avoid a negative work culture by keeping employees happy otherwise, success will be significantly hampered. Productivity ratios measure output per employee or the time and cost to deliver a service, and revenue per employee is an important measure of operational efficiency.
Website Traffic
Website traffic is another measure of success that is important to track. It is, predominantly, the first interaction that supports customer acquisition by turning visitors into new customers and thus should receive a good investment of time, attention and money.
A website, leveraged with quality SEO content and a top UX, drives leads closer to being customers and supports customer acquisition efforts by improving customer engagement and conversion. Website analytics should measure metrics tied to marketing efforts, marketing campaigns, sales and marketing efforts, customer acquisition strategies, and broader marketing and sales efforts.
Track Goals
Smart goals are what separate great leaders from average managers. Easier said than done. SMART goals should connect the right success metrics to business goals and strategic goals, because whilst the main goal of most businesses is increased income, this is not a helpful metric to track.
Find smaller, insightful goals that enable wise decisions, including customer focused metrics as well as financial and operational key metrics. Success will, to a degree, be determined by what goals you set, what you measure relating to these goals and how you measure. Customer retention rate measures how many customers remain over time, while customer churn rate indicates how often customers stop doing business, making both useful ways to track customer satisfaction, customer loyalty, and long term success.
Measurements should be a combination of short-term AND, more importantly, long-term measurements. Big change takes time and needs patience. Watch for result changes over a few months and even up to a few years (business size dependent).
When starting to measure success, focus on outcomes, not proxies, and avoid vanity metrics by using daily measurement to link activity to real business outcomes. You can also establish secondary metrics for measurements from different angles, such as your social media likes and follows as a marketing metric. Google analytics supplies good measurement tools for social media management.
What are some indicators of success?
Here are some signs that your business is going in the right direction.
Earnings happen during holidays – Small business owners work after hours, on weekends and when they are away on holiday IF they can take a holiday at all. If you are going away on holiday, that is the first good sign. However, if you are going on holiday (without logging in) AND the business is still earning money, then you have built a company, not a job, and your business is progressing.
Search engine results – The digital “high streets” are the first pages of results delivered by search engines. When your business is showing up on the first page of search engine results (not as an advert) then your digital marketing is successful.
Customer feedback – When you receive feedback from a customer about the difference your product, service or treatment has made in their life, that is a sign you are on the right path, especially when it is backed by customer satisfaction metrics rather than left anecdotal.
The market comes to you – When sales are being done by people with whom you have no connection, nor have been specifically targeted with a marketing pitch. This is a good sign you are on the path to success.
Market reaction – If you expect 50 people to attend your launch, attend your event or sign up with your company and, in reality, 500 do, this is a good indicator of a good product.
Referrals – When your product or service is referred by customers to their network, this is a top indicator that you are on the path to success and often reflects strong customer loyalty and a healthy Net Promoter Score (NPS).
Resilience – If your business is hit by very tough circumstances and it pulls through, albeit an extremely successful time, this is a good indicator that your business’ immune system is healthy.
Media attention – If a journalist, blogger or influencer favours your product without being pitched to do so and publishes content on it, this is a good sign and a very helpful tool.
Positive cash-flow – Cash flow is king, and it is an excellent indicator of business health, although it differs from profit. It is an element keenly investigated during the due diligence process if you are selling your company and affects the evaluation of your business. Positive cash flow can be reinvested into the business, strengthening it and growing its profits, while net income ratio indicates profit after expenses are deducted and Return on investment (ROI) measures income relative to investment costs, both of which can indicate the company’s success.
Book contract – If a publisher is interested in you writing a book, this is a strong indicator. Publishers are pitched with thousands of books, so if you are being considered by a publisher, then this is a good indicator that you or your product is in demand from the market. In the digital age, a book can be an e-book, and thus can be distributed globally and quickly. Being published via books or thought leader articles will instantly add to your company’s gravitas.
Success goes beyond financial matters. When measuring success, it is prudent to cover customer experience, customer relationships, marketing efforts and financial results together to gain valuable insights, which enables businesses to make informed decisions.
A metric that is growing exponentially in importance is how eco-conscious and LGBT-conscious your company is or brands are. It would be prudent to put metrics in place to measure your company’s growth towards full consciousness.
Running a small business is not for the faint-hearted, and many owners reach a point where they are simply trying to avoid closure. To measure business success, start by tracking clear, consistent metrics tied to your goals, such as cash flow, the number of clients you are reaching, cost reduction efforts, employee performance, website traffic, and progress toward specific targets. For small business owners, startup founders, and managers, these numbers make it easier to judge whether the business should remain open, await a turnaround, or close up shop.
Success has different and similar standards globally, which is why measurement needs to go beyond instinct. In small businesses and startups, the most common business measurements are the rise and fall of cash flow, the number of clients being reached, and cost reduction efforts, but useful assessment also includes goal tracking, performance reviews, indicators of growth, and even factors such as company culture and eco-consciousness. By using data and regular reporting, you can see whether the business is moving toward the results and values that matter to you.
