Every business has its own ways to measure how well it’s doing.
It might be sales growth, number of new leads or customers retained, recurring monthly revenue or agricultural yields.
But several metrics are easy to monitor—and are commonly used by businesses to keep tabs on how they’re doing.
Review which metrics are relevant to your business. Then, you can start taking steps to strengthen them.
|1| Gross margin
Gross margin is the difference between what you pay for a product and what you sell it for. If you don’t have physical products, skip this.
Look to improve your gross margin by:
- Increasing your prices.
- Reducing cost of goods sold (COGS) by using lower-cost materials or different components where possible without affecting quality.
- Asking your current supplier to reassess its pricing (especially if you have a good long-term relationship).
- Reducing waste. Conduct an exercise to spot any areas where there’s excess waste and identify ways to minimize it. Buy only what you need.
- Recycling and reusing any waste materials you can. Make sure your employees are doing so as well.
|2| Average revenue per customer
Increase the number of things customers buy from you. It can be products, hours, services, warranties or insurance. It’s anything where a customer is encouraged to buy two things rather than one.
Build average revenue by:
- Using sales data to identify what your best customers are buying. Think of other products or services you could sell with them, and tailor special offers to bring these customers in more often.
- Up-selling and cross-selling.
- Bundling products and services.
- Focusing on your “gold” customers. These customers are responsible for high, profitable sales. Target the ones with the most potential, and then develop a specific proactive plan for each of them.
|3| Revenue growth
Steady, predictable revenue growth is the sign of a healthy company.
Grow revenue by:
- Using in-bound customer relationship management (CRM) software to better predict who’s more likely to buy from you. Set up lead generator tools or content to gather interested prospects to follow up.
- Developing new products or services for your existing customers.
- Creating a marketing plan to identify, locate and sell to new customers.
- Looking for new distribution channels to expand your customer base, like third-party selling (Amazon) and your website.
- Franchising is a popular option if demand for your product or service warrants it.
|4| Revenue per employee
Several factors can affect revenue per employee, including average revenue per user, better systems and processes, and automation. It’s often useful for businesses that sell per hour.
To encourage higher revenue per employee, try:
- Making sure staff have the equipment and training they need to do the job right and keep them informed about business performance and management decisions.
- Setting goals for your employees. Help them put a sales plan in place, and then measure how successful it is.
- Making sure your sales data is transparent so everyone knows who’s selling the most.
|5| Net profit percentage
This is the margin that accrues from all the effort of a business. It’s the ultimate measure of how a company operates.
Increase your net profit percentage by:
- Lowering overhead by looking around for better deals on costs like energy, internet and phones
- Reviewing your equipment needs. You might be better off leasing equipment only when it’s needed instead of buying it outright.
- Quickly collecting money owed to you. Money should come in faster than you must pay it out.
- Considering outsourcing some of your tasks, like payroll, to companies that charge a monthly fee instead of a salary.
Learn the benefits of hiring a virtual assistant >
|6| Net promotor score
Track your customer satisfaction. Asking for opinions, feedback and ratings can give you invaluable information about dissatisfaction (for remedying) and potential advocacy (for marketing amplification).
Anything that improves the communication between customers and a business should lead to better decision-making. Try:
- Analyzing the market to identify trends. Try to predict customer needs. Find out what people are saying about your competitors, and use that information to improve the customer experience in your business.
- Keeping track of any customer complaints. Document who the customer is, what they were unhappy about, what was done to resolve it and if they went away satisfied.
- Making the most of social media to keep in touch with your customers and measure their satisfaction levels.
- Emailing annual or bi-annual customer satisfaction surveys.
Final thought
By tracking and improving these six variables, you should improve your gross margin, raise the value of your average sale, drive revenue, build employees’ productivity, increase your net profit percentage and have happier customers.
Decide which of these numbers you want to measure. Then set up monthly reporting so you can see if they improve each month or act before they deteriorate further.
Implement the actions that are relevant to your business. The higher and better these are, the stronger your business will be.
