When I’ve worked for large for-profit businesses, there were a ton of metrics that measured just about every activity I did. Those metrics revealed my successes and failures each month. As much as I hated the level of analysis, I have to admit (in retrospect) that there was value to it. Compare that to some of the non-profits and government organizations I’ve worked for. Zero metrics… and predictably low productivity.
In starting my own business, I knew that metrics were a way to keep me on track and to constantly “take my temperature” to see how my business was doing.
So, what metrics do I need to measure company-wide success? I’ve included this question in my list of 100 small business strategy questions. You might have the same question, too. Here are some considerations to keep in mind based on my own experiences owning businesses…
- I love the idea of measuring profit but in the early days of most businesses, that’s not very realistic. Early on I measured revenue because profit wasn’t on my radar initially. But any sort of money-coming-in measurement isn’t always easy to measure because it doesn’t give a true picture of the business. You might be thrilled to have $100 coming in a day… but that income doesn’t sound as good when you realize that you have $200 going out.
- I would suggest that you measure something that is easy to measure. In my business, there might be several months between when I pitch an article idea and I finish it and get paid. So when do I measure that in my business? The effort was spread over several months so it doesn’t seem correct to measure revenue each month.
- I also prefer to measure action instead of results. With action, I know there is a direct link to what I do. With results, there are a bunch of other factors that I’m waiting for. So, for a long time, I measured the number of proposals I wrote as one of the key measurements. (I knew my closing average and I knew how much I earned on average per closed proposal so it was pretty easy to estimate… plus, I can knock out a proposal in an hour so it wasn’t spread over multiple months). My business has changed (I don’t rely so much on proposals but that proposal measurement period was probably my most productive and efficient.
- I would also recommend that you measure something inspiring. I write a lot and I toyed with the idea of measuring the number of words written each month. The problem is, I can get inspired about writing 10,000 words in a day but the idea of writing 200,000 words in a month (10,000 x 20 work days) is overwhelming and therefore not inspiring.
- I also like to measure things that are related to your primary means of revenue generation. When I measured per word it was okay for a while when I was paid per word… but I no longer get paid per word. And even when I was paid per word, it was easy to ignore critical (but non-measured) activities like marketing and administration because they didn’t bump my word-count.
So what’s my advice? Sadly, I don’t have a specific number to tell you to measure. And frankly, right now I’m searching for a good number to measure in my business (since I no longer measure the number of proposals written). But if you use my above observations as a sort of checklist, I think you’ll find one number (or probably a couple of numbers) to help you.
For additional reading on the topic of business metrics, here are some blog posts where I’ve talked about this concept in other ways…
- One number to rule them all: This was an attempt to collect a few metrics together that measured several aspects of my business. It was fun and effective but only lasted a year because I ended up working with just one client in the following year so I didn’t need to measure all of the same things.
- I’ve also been a big advocate of setting up metrics for different stages of your sales funnel (which would measure marketing AND sales activities). I talk a lot about this in the blog post 40 ways to optimize your sales funnel.
- Your sales funnel equation talks about an interesting article I read on a very-hard-to-measure calculation… I think there’s some really valuable metric opportunities here for business owners who can figure out how to measure the items mentioned in this blog post.