In a previous article, we discussed the importance of bookkeeping to SMEs. While these largely revolve around financial data, financial metrics are not the only metrics or data with which to track and chart your business growth trajectory.
Taken together, sales, marketing, customer experience, and financial data can better inform a business owner for proactive growth planning. If you regularly collect and examine your company data, you gain insight into business functions, identify weak points, and take charge of creating new growth streams. Here are the key metrics to planning your business growth, across 4 data categories:
Without strong and stable finances, no amount of grand marketing or customer acquisition plans will take off. With a clear view of your financial data, you can budget ahead of slower seasons, stock up on inventory ahead of peak times, and above all, maintain a healthy cash flow – a key indicator for lenders and investors alike in evaluating the health and potential of your business.
First, we start with expenses. These include fixed expenses that are the same every month, such as rent, wages, and technology subscription fees for your business; and variable expenses like utility bills, inventory and marketing expenditure.
Second, we look at revenue. This is the topline figure for your business, before you subtract expenses to figure out your profit. If your business is relatively new and you have yet to record a profit, a lender or investor would want to see a record of consistent revenue growth. Soon, you will see patterns and can more accurately forecast sales and cashflows.
Businesses that turn a profit quicker and consistently over a period typically have healthy cash flows to further reinvest and grow. But perhaps a better indicator would be profit margin, calculated as (Profit/Revenue) x 100. Simply turning a profit may be fool’s gold if your profit margin is too low. Expenses are bound to rise with inflation each year, so your profit must comfortably exceed that. Many SMEs prefer to cut expenses rather than raise prices to expand their profit margins.
With Alliance Digital SME’s BizSmart ® Solution, you can enjoy 15% off monthly subscription plans to SME accounting software such as Bukku, which can give you a snapshot of these financial metrics at a moment’s notice.
Maintaining an online presence and engagement with potential customers costs money, whether it is website hosting fees, hiring a social media manager, or paying fees for apps that link all your social media profiles to your point-of-sales system. Thus, it’s vital that you track key marketing metrics to weed out the chaff of underperforming marketing avenues and instead invest in proven campaigns.
First, let’s look at website analytics. If you are in B2C, you’re likely spending on software or applications that cross-sell your products across various e-commerce platforms, social media sites, and consolidating orders at your website. Your webhost should record total visits, pages visited, and how quickly visitors leave your site. You can even track where your visitors come from: a Google search, your Facebook page, or perhaps even from your newsletter? By working backwards, you can figure out which web pages need improvement and which social media channels or SEO keywords are working best to bring in new clients.
Next is social media engagement. Keeping up constant engagement with customers on multiple social media channels can take up resources, so keep a record of total likes, comments, clicks, and shares each social media page gets. Depending on your sector and target market, you can focus resources and energy on platforms that perform well for your particular business. A business that does well on LinkedIn is probably less active on Twitter or TikTok, and vice versa.
If your business sends out email campaigns or newsletters to customers, make sure you can track email analytics to find out which emails are being opened and which are simply being sent straight to spam. Of the emails being opened, how many click through embedded links and if so, which ones? That can help you narrow down what promotional language or offers work to bring in new and recurring customers.
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The key to keeping costs low is having recurring income from returning customers. Unfortunately, in a digital-first customer engagement model, you need to quantify customer satisfaction and identify parts of the engagement process that need to be improved on. Keep an eye on your customer retention and churn rates (i.e. the amount of customers you’re losing) to see how you are doing compared to others in your industry.
If you are losing customers, find out why from the horse’s mouth: read the customer reviews. If there are recurring comments about the same issue i.e. slow service at your outlets, you can immediately address this pain point.
Remember marketing analytics? The website visitors, people who clicked on your emails, and social media commenters that made inquiries about your products are all examples of qualified leads. Properly qualifying a lead is essential to developing a healthy sales pipeline.
This brings us to the lead conversion rate, which is the percentage of qualified leads that turn into sales. This is the most common way to evaluate how well your sales team is doing. If your sales team participates in an exhibition and collects the contacts of 10 interested both visitors, but only 2 of them turn into actual sales, your lead conversion rate is 20%.
Putting these four key metrics together to chart your business growth trajectory accurately may take time, but it is a necessary endeavour that will help you devote your time and resources to your business’ strengths and pivot away from underperforming parts of the business.
It might be more helpful to get a fresh set of eyes to help you interpret the data collected to best boost your business. Alliance Digital SME’s BizSmart ® Solution universe has many industry partners that provide advisory services, such as OKRscoaches.com and BizAdvisor Digital. Both provide exclusive offers to Alliance Bank, with OKRScoaches.com offering a free 30-minute assessment of a business’ OKRs (Objective & Key Results), and BizAdvisor Digital offers a complimentary first consultation as well as up to 10% off all its services. Check out the Alliance Digital SME’s BizSmart ® Solution universe here and find the best solution partner for your business today!