Every business will have a series of signals that indicate business conditions are changing. It could be the number of new leads in your pipeline, foot traffic, web traffic, work in progress, contracts awarded, speed of your distribution channel, onboarding, yields or downtime. These business metrics often give an early warning signal before the financial impact is felt.
Here are five business metrics you may like to start to track and improve.
The number of prospects in your sales channel. This could be downloads or enquiries from your website, people entering your location, or the number of tenders you’ve been short-listed for. Take note that lead timelines can vary significantly. Customers on a retailer’s website might take a few minutes to decide to buy something. Building companies may have to wait for months (or years) before a lead generates revenue.
Lead metric examples:
Decide which lead metric is relevant to your business, identify the best way to track it, and then set up the reporting cadence (weekly, monthly, six-monthly) that is best.
Your customer retention metric (or customer burn rate) tells you if customers are returning to your business, or dropping off, possibly without you noticing. Customer retention can be down to how well you manage your customer relationships, support for when things go wrong, and offer personal one-to-one help. You may want to develop a ‘net promoter score’, where at the end of each engagement, customers rate your service (for example, from one to ten). Consistent poor results could hint at future trouble.
Other metrics you may want to track related to customer retention include returns, refunds and complaints, hinting at poor delivery or fulfilment.
For many businesses, the amount produced at the right quality is a key metric. For example, agricultural businesses rely on high yields, manufacturers prefer to have their equipment and machinery operating at full capacity, and professionals like to bill as many hours possible in a day.
Other production metrics to measure include:
In a perfect world, a business would get everything right 100% of the time, but even the very best companies will make a mistake. So pick two or three critical functions you need to get right.
Physical, mental and employee welfare are important measures of risk and liability, though accidents causing injury are often industry specific. For example, you may be less concerned about injury in a professional services business, but mental health and stress might be. Alternatively, physical safety in building, manufacturing or construction businesses is much more serious.
These metrics can include:
Almost all industries are threatened by the effects of climate change, either directly or indirectly. The disruption to a smaller business compared to larger businesses can also be more severe. For example, a flood can ruin a single owner-operator retail business, whereas a nationwide retailer can probably survive. The origin of what you sell, and sustainability practices (recycling, use of environmentally friendly materials) could also be tracked.
Metrics to consider:
If you don’t care about climate change, your customers will vote with their wallets. Taking action to reduce the impact on our climate is crucial, but it also makes good financial sense.
As a business, it makes sense to know what non-financial metrics indicate you’re doing well or not. Deciding what these are and then monitoring regularly will allow you to detect early what remedies need to be put in place.