Business is like baseball, it is full of statistics. In baseball, batting averages and win-loss records are vital, while other numbers — like the number of times fans decide to throw home-run balls back onto the field — are interesting but don’t really matter. The same idea holds true in business; some metrics will help your bottom line, but others are irrelevant. How can you know if you’re measuring the right stuff?
Define Your Goals
Anything you measure should relate to your business goals. Bizmanualz recommends the acronym SMART to determine how you want your business to move forward. Your goals should be:
- Specific — Don’t say you want to increase sales. Say how much you want to increase sales.
- Measurable — Do you have a method to accurately monitor your progress?
- Attainable — Are your goals realistic?
- Relevant — Your team should understand your goals and why you want to achieve them.
- Time-bound — When do you want to reach your goals?
Metrics that Matter
It is true the metrics that will matter most to you depend on your specific business, but there are some statistics that all business should be interested in, including:
- Customer acquisition cost — Divide the amount of money you put into a specific marketing effort by the number of new customers you acquire through it. Acceptable customer acquisition costs vary between industries, so perform research to find your target number.
- Customer loyalty — This deals with finding out how many return customers you have. Return customers are more likely to spend greater dollar amounts. Also keep in mind that the more repeat customers you have, the higher customer acquisition cost you can accept.
- Operating productivity — How is each member of your sales team performing? During what times are you busiest? Numbers that answer those questions will help you train your employees and plan your marketing campaigns.
- Overhead costs — These fixed expenses, such as rent and office supplies, may get out of control. Keep a close eye on them so you can look for ways to reduce monthly costs.
It may also behoove you to consider how your location impacts your goals. If your store doesn’t get enough foot traffic to reach your goals, consider using IdealSpot’s services to find a location that will help your business progress.
Metrics that Matter Less
There will always be things that affect your business that you cannot control — why bother with measuring them? For example, if inclement weather forces your store to close for a few days, instead of focusing on the money you lost, focus on increasing sales during the time your store is open.
You also shouldn’t let skewed numbers alarm you. Sometimes a single outlier can impact a statistic so the final result isn’t a true representation of the big picture. If a mean doesn’t make sense to you, look for a median instead.
Business, like baseball, is a game of numbers. You have to know which numbers to focus on so you can rack up the Ws.