Know Your Numbers
Every action you take as an entrepreneur ties back into your brand and your strategy. So, how do you know if you're being effective? How do you know if your business is viable? Profitable? Headed for the landfill? You do this via metrics and knowing your numbers.
In this series you've planned, gotten connected by getting out there, and you've set up systems. So, how do you know where you stand? It's all in the numbers. This is what big companies would call ROI (return on investment). As an entrepreneur you also need to know your ROE (return on energy/effort) as well because you don't have a team of thousands working for you. You need to know what you financial position looks like at all times to manage and predict cash flow.
So, how do you know where to start? I recommend starting with the obvious and then expanding from there. Remember, metrics are all about understanding your efforts and your business. This is not an exercise in creating numbers and spreadsheets as a hobby. You want meaningful measurements from which you can steer your ship.
In my own entrepreneurial evolution I have done a good job and a deplorable job of metrics. Because I have a degree and background in accounting, one of the first things I did was put in the infrastructure to keep my personal and business finances separate and then to account for everything (good job!). It's only with time and growth that I've made more meaningful sense of the numbers, but at least they were there for me to know. Tracking my time and efforts? Initially I did nada (bad girl!). My point being if you're not yet tracking what you need to be, don't panic, simply adjust.
There are many other numbers you want to know beyond the financial if you wish to be productive and profitable. Let's take a look at what those are and ways you can do so easily.
What to Measure
The more you can measure, the better off you'll be. The key is being smart about what you measure and how you measure it. The more automated it can be, the better. Delegation is also a wonderful thing.
At a bare minimum you need to know:
- Financial numbers
- Time and costs to deliver your product/service
- How you spend your time
- Prospect to customer conversion rate
- Web analytics for your online marketing
- Metrics for other marketing efforts
You can expand each of these far and wide and get as simple or complex as you like. The most important takeaway is that you truly need to know what is actually happening in your business. Winging it does not work. Hoping does not work. Knowing the numbers works.
How to Measure
There's an app for that! Truthfully there is a simple to complex technology solution for anything and everything you would ever want to measure. If you're just starting out and/or are the sole person working in your company, you don't need to go crazy here. Don't get sidetracked by the bright-shiny technie object syndrome. Start small, start with manual tracking if need be. The most important thing is that you start.
Let me share some of my favorite ways I know of for tracking important stuff. Please add your favorite tools to the comments as well. Like I said there are a LOT of options.
If you track nothing else, by all means get your financial numbers in order. I can't tell you how many new business owners avoid this step only to find themselves out of financial bandwidth to stay in the game long enough to make their business viable. Some popular applications include: QuickBooks and FreshBooks.
Time is your most valuable asset as a human being. Entrepreneurs sometimes forget this while heading down the path to early burnout. The first few years of my business I did not track my time. For hourly projects I manually tracked my time, but that was it. Then as I was annoyed because I was overworked and underpaid and had no one to blame but myself, I decided to track my time. MAJOR eye opener. Not only did it enable me to bill more accurately (which usually meant more billable hours because like most people I underestimated my manual calculations), but it also enabled me to more profitably price my services going forward. Since that time I've expanded my tracking to include marketing activities, project pricing (so I actually know what I'm earning per hour for fixed-price jobs), and administrative tasks so I can calculate my return on effort and estimate how many hours would be involved for me to delegate and hire someone to do certain tasks for me.
There are a lot of great free and paid tools for this. Here are a few I like: StopWatch Plus, Toggl, and RescueTime. Add-ons for QuickBooks and FreshBooks can also accomplish this task for billable hours.
Knowing your customer conversion rate is critical to success. This will help you hone in on how effective your sales conversations are, how many people you need to speak with before you get a sale, and how much time it takes to acquire a new customer. Because you're already tracking your finances above, you will know how much a customer is worth to your business over time (known as lifetime value of a customer). A customer relationship management system (CRM) can be great for managing contacts and conversations. Software like Act!, SalesForce.com, and Highrise can help. For most smaller entrepreneurs, a simple spreadsheet will do.
Tracking both online and offline marketing efforts is crucial so you know what is and is not working. While marketing is a distance run, you don't want to beat a dead horse. Online analytics are easy to come by. I can remember back in my early days as a corporate webmaster, web analytics were nonexistent and what you did receive (for a great deal of money I might add) were rudimentary at best. Now you have robust statistics at your fingertips for free with Google Analytics. You can create goals within Google Analytics which is handy to know what visitors are "converting" to whatever next step you want them to (buy something, sign up for a report, etc.). Needless to say it is integrated with Google Adwords and Adsense so you can track those efforts as well. Social media activities are also worth tracking. You can create reports right within HootSuite. Facebook Insights will give you a glimpse into your Facebook activity. If you're using email marketing, your email service (Aweber, Constant Contact, 1ShoppingCart, etc.) should provde you metrics on each broadcast.
Other forms of marketing results can be measured in a variety of ways. The most simple approach is to grab an excel spreadsheet and keep track of results of activities such as networking events and speaking engagements. If you're using direct mail or other forms of advertising, keep tracking results in mind as you design the campaign.
I hope this overview got you thinking about the ways you can start tracking activities in your business. Don't get caught up in making it complex. Just start with the most important items to track (time and money) and get into action. As long as you have the data, you can always hire someone to help you interpret it going forward.
Are you measuring your business efforts? If so, in what ways? What tools do you love/hate? Share your lessons in knowing your numbers in the comments...
Paula Gregorowicz is a life and business strategist who helps women that want to live their true calling by building a successful service based business without the all the self-doubt, struggle, and overwhelm.
Download the Free Report: Your Own Uniqueness: The Path to Purpose, Prosperity, and Playfulness at http://www.thepaulagcompany.com.
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