How do you know if your business is doing well?
Maybe that’s not a tricky question at first glance. But it can be a bit difficult to tease out an answer that works for everyone. Your reply could be ‘making a good profit’ or ‘gaining a sense of fulfilment’; but those aren’t precise answers. What do they mean in specific terms? What is ‘a good profit’ in your book? And what would ‘a sense of fulfilment’ look like for you?
In the end, it all comes down to the goals you have set for your business- what they are, and whether your company is able to meet or surpass them.
But there are ways to measure the performance of any typical enterprise. Perhaps you do know what some of these are. There’s a good chance that you might be missing a few important yardsticks. And when this is the case, you run the risk of continually achieving less than adequate results with your enterprise.
Let’s help you get the basic measuring rules covered. Here, we’ll lay out the crucial things every businessperson should consider when evaluating the state of the firm they’re running.
1. Cash Flow and Profits
You almost certainly know about this one. It’s quite clear: you can only go on for so long without maintaining a good profit margin. But (here’s that question again) what’s a ‘good profit’?
The answer to this depends on a number of factors. First, you’ve got to build up enough savings to back into expanding your enterprise after a while, apart from what you’ll keep as your own ‘reward’. Remember, this comes after you deduct operating expenses and taxes from your gross revenue. If your profit over time doesn’t allow you to up those savings, they aren’t ‘good enough’.
Your financial statements will help you establish how much profit you’re making, as well as the volume of cash going through your business over given time periods. The former can be ascertained from the Income statement, while the latter can be read from a Cash Flow statement. A financial record, the Balance Sheet, reveals how much you own and the liabilities you’ve accrued- basically your business’s financial state.
2. Results from Your Marketing Efforts
If you’ve run paid advert campaigns for your social media, you should look beyond the number of page likes they generate and examine their effectiveness in gaining new customers for you. The same principle should apply to other kinds of marketing, whether they are done offline or online.
The best way to measure this would be to find out how much marketing money it costs to bring in an extra customer. For example, if you spent ₦150,000 on a marketing campaign and gained 30 new paying customers from it, this would mean that it cost you ₦5,000 to bring in one new buyer.
It’s up to you to decide whether the amount spent per person is better or worse than you consider alright.
3. Your Customers’ Satisfaction
Your customers are the principal reason why your business will ever grow. Lose them, and you’ll lose your venture too. When you’re giving them what they want, they will very likely stick with you. This is something you should be working to achieve.
One way to feel their pulse would be to ask them for their opinion of your business. What do they think you’re doing ok? What is it about your service would they like you to improve on? Pose these questions in a survey or in one-to-one conversations with them. Analyzing the overall response should give you a general picture of your customers’ sentiments about what you’re doing.
If there’s a significant number of people surveyed pointing out a particular underwhelming thing about your business, you may want to see if it’s something you ought to change.
4. The Number of Customers You’re Gaining
How frequently are you able to convert leads to paying clients? How many of them are you gaining within a given time stretch?
You might think that it’s okay to have the same set of clients for a long period as long as they’re paying well. The fact is, you can never be fully certain that they’ll always stay with you. This is one reason why you should have your eyes on growing your customer base. Of course, there’s also the obvious advantage of a potential increase in sales you could record with more people buying your products.
5. Employee Performance
A business is only as good as the people who work for it. When a company’s staff brings the appropriate skills and effort to bear on the job, it reflects positively in the company’s overall output.
Periodic performance appraisals can help you determine how well each employee is dealing with their assigned duties. By reviewing the work done by your team on a regular basis, you will be able to tell how much they’re contributing to the growth (or otherwise) of your company.
6. Personal Satisfaction
Even if you’re hauling in big profits and building a huge public image for your brand, you may still feel dissatisfied with where your venture is going. It all depends on what your own aims are, and how well the business you’re building mirrors them.