Most small businesses operate in rapidly changing markets, which can present an abundance of opportunities. However, the key to business success is not the ability to respond to the next big thing – rather, it’s the ability to focus, and remain focused, on what’s important.
Here are six fundamental questions to ask yourself when measuring your business’s success.
1. How healthy is my cash flow?
Cash flow is the ultimate measure of business health. It can be the difference between staying afloat and being overtaken by competitors. It is often used by investment bankers as the key metric to determine company value, and the test of a business being self-generating is regularly used by company directors to determine if a business is sustainable.
If your business is cash flow positive – with more money coming in than going out – you are in a good position to build a profitable and sustainable enterprise.
If you are starting a new business, or experiencing a slowdown, this is an equally important time to focus on growing your profit. Consider ways of reducing expenses or streamlining operations.
2. How healthy is my sales pipeline?
Understanding your sales pipeline is the first important step towards improving it.
The pipeline reflects different stages in the sales conversion process. At the top of the pipeline, you can track the success of marketing activities. By monitoring where your leads come from (eg website, direct mail or advertising), you will learn which activities are more likely to deliver returns, and you can adjust future marketing investment accordingly.
As you qualify leads and actively engage with prospective customers, you can gather a wealth of insights such as why deals are won or lost, who your referrers are, the value of repeat versus new sales. These insights will help inform your decision making and help you win more work.
3. Are my customers happy?
There are many studies of customer satisfaction which suggest that the cost of acquiring a new customer can be anywhere from five to 25 times more expensive than retaining an existing one. And, according to the Frederick Reichheld of Bain & Company (the inventor of the net promoter score), profits can increase by 25% to 95% when customer retention is improved by only 5%.
A retail study performed by Bentleys in 2016 highlighted the importance of the customer experience as a key factor in customer happiness. Not only do customers need to enjoy and depend upon the service, they also need to enjoy the experience with the brand with every interaction.
Customer satisfaction metrics include net promoter scores, lifetime value, Google ratings, repeat purchases and referrals received. As such, they have a direct correlation with increasing revenues (although not necessarily profits).
4. Are my employees happy?
As the face of your brand, your employees are critical to the success of your business.
Best-selling author of The Happiness Project, Gretchen Rubin, has identified many benefits of having a happy workplace, including improved productivity, better leadership, enhanced creativity, and better teamwork.
If your employees feel appreciated and have a sense of belonging, they are more likely to go the extra mile for the customer and remain a contributing staff member for longer. Retention of quality staff is an important metric of business success.
5. What makes my business different?
According to Theodore Levitt, a professor at Harvard Business School and author of The Marketing Imagination, “differentiation is one of the most important strategic and tactical activities in which companies must constantly engage.”
Understanding your market and innovating in response to changing customer needs can help your business remain relevant and secure a competitive advantage.
Customer loyalty, the successful take up of new products, revenue growth are all indicators of a business’s ability to respond to market needs.
6. Am I happy?
Not to be discounted is your own satisfaction with the business and the direction it is taking. If you aren’t happy, it can trickle down to your employees and then to your customers.
Articulate your vision and values. Reflect every now and again to ensure you are satisfied with progress and make changes to your business if necessary.
Lifestyle factors may be equally important as revenue. So be true to your aspirations and measure your business’ success accordingly.