Business Advice · 5 May 2021

How to measure the success of a business

How to measure the success of a business

Running a small business is not for the faint-hearted, with most just avoiding closure. The path forward can seem fogged with unknowns. How does a business owner know if the business should remain open, awaiting a turnaround, or close up shop? They need to measure the business success and where they are on the path to it.

Success has different and similar standards globally. In small businesses and startups, the most common business measurements are that of the rise and fall of cash flow, the number of clients being reached, and cost reduction efforts.

Start thinking in metrics

The fundamental starting point of measuring success is to start thinking in metrics. To effectively measure progress, it is vital that you have clear, strategic metrics and strong data collecting and reporting tools. Without the numbers, you are merely making assumptions, and we all know the saying about “ass-u-me”. Tracking metrics data is a conditional measurement requiring constant and consistent attention.

Setting measurable targets is an excellent way to monitor your success, but it requires experience and business acumen. 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 gelt at Hanukkahmeasure 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? Is there 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 and goals 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.

Establishing a set of thoroughly respected values will become a part of success measurements.

How to measure business success

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. The process is lengthy and requires lots of attention from you, but the return on investment is multi-faceted.

Employee Performance

Finance measurements are only part of the bigger picture of measurements. Employees’ performance needs regular motivation, and a related success measurement can be done via employee performance reviews.

Avoid a negative work culture by keeping employees happy otherwise, success will be significantly hampered.

Website Traffic

Website traffic is another measure of success that is important to track. It is, predominantly, the first interaction that potential customers have with your company 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.

Track Goals

Smart goals are what separate great leaders from average managers. Easier said than done. 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. Success will, to a degree, be determined by what goals you set, what you measure relating to these goals and how you measure. The quality of the result obtained will be deeply influenced by this.

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. 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.
  • 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.
  • 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.  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.
  • 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 the larger scope of reviewing and assessing balance sheets and cash flow statements, be assessing the reviews published or sent by customers, be undertaking regular performance improvement plans of employees, be harvesting insights from customers and be assessing marketing metrics.

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.

Sign up to our newsletter to get the latest from Business Advice.


 
TAGS:

ABOUT THE EXPERT

Work and Wellbeing