The 5 most important metrics to actively track as an SMB
It's not always straightforward, understanding the health of your small business. The right metrics can help. They allow you to monitor different aspects of your business to give you an overall view of whether your company is performing well, or if one area needs more of your focus than another.
Which metrics should your small business actively track?
1. Sales revenue
Measuring your sales revenue is such a no-brainer that it's easy to miss why it's actually so important. It's a direct finger on the pulse of how interested your customers are in the products or services on offer, as well as how effective your marketing is.
To get more out of this metric, try:
- Splitting your revenue up into different product streams – For example, if you're a vet, knowing how much profit you're bringing in from small animals in comparison to large gives you an indication of where your business' strengths are.
- Measuring growth – Compare your sales with last year or even the previous quarter. Are you growing your revenue, or are there any seasonal cycles to your sales that you weren't aware of?
2. Gross margin
Your gross margin tells you how much you get to keep out of every dollar earned. The higher this percentage is, the more efficiently your business is running and the more extra money you have left over to potentially invest back into your business.
The calculation to work out your gross margin is as follows: Revenue – Costs of Goods Sold/Revenue.
If you want to improve this metric, you can either:
- Make your operations more efficient and cut back on costs.
- Boost revenue by increasing prices.
3. Cost of customer acquisition
Knowing how much it costs your business on average to bring on a new client is important, as it allows you to see whether your marketing strategy is working. If you're investing more money on bringing a client on board than they're spending with you, you're hemorrhaging cash.
Tracking this constantly allows you to see how well your marketing efforts are succeeding. For example, if you try a new strategy that's slightly more expensive but conversion rate doubles, you know you've struck gold.
To measure, simply add up your marketing expenses over a fixed period and divide by the new customers acquired during the same time frame.
4. Net promoter score
Customer loyalty is an indication of how well your company is performing against expectations. Check in with your clients and find out answers to these questions:
- How likely are they to recommend your organisation to someone else?
- Why do they feel that way?
If there's a particular reason they would highly recommend you, maybe this is an area of potential growth. On the other end of the scale you can find out what's letting your business down in the client's eyes.
5. Website total visits
In the digital age it's impossible to ignore how powerful a tool the internet is for businesses. Having a website means you're already on the way to making good use of it.
Keep an eye on the total number of website visits you get each month, and see if you can improve the number. The better known your site is, the more likely it is that customers will find you online when searching for services. To build your site visits you could do a number of things, including:
- Developing a blog that you update regularly with information that's useful for your clients.
- Creating a social media account for your business that allows your customers to connect with you and click through to your site.
- Offer useful online tools that clients could engage with.
If you'd like to know more about how you can track and measure your small business's health, reach out to Wilson Porter today. We can help you set up the best practices for your company moving forward.