Your Business: Creating and Analyzing Meaningful Metrics for Your Business
Every business owner wants to have a better understanding of his or her success. It is important to understand what is being done when things are going well, and even more important when things are not.
Every business should have some performance goals, and metrics in place to track how the company is doing against these goals. While this may seem like a no-brainer, in practice it can be harder than it looks to establish meaningful metrics.
It has been my experience that when a company is ready to take the next step and really start measuring performance and metrics, they tend to go overboard. They go from measuring nothing to wanting to measure everything.
This can lead to a sharp decline in productivity as well as company morale, as companies tend to initially focus on employee productivity rather than focusing on specific company performance goals.
If you are new to measuring activities and associated data points, it is best to first identify what you are looking to measure and, second, what the metrics can tell you about your business. What’s important can vary from business to business, or even department by department.
If you are in product development, then errors, bugs, flaws or new feature completion may be what you want to track. In customer service, you may want to track inbound customer complaints, resolutions and overall customer satisfaction.
In addition to determining what it is you would like to measure, you will need some way to capture and measure the activity so you can begin to establish averages and trends. As referenced in many of the articles on our blog (www.d-toolsblog.com), we utilize Zoho CRM, but there are a number of platforms that help companies track and measure activity.
As a VP of Sales and Marketing, I am interested in metrics related to revenue. And while there are many, I’ve found that metrics only matter to me if I can understand and, most importantly, take action from the results. On the sales side, it is relatively easy: Sales for the month, quarter, year, etc. Then measure that number against previous month, quarter, year, etc. This is the most basic metric and one that every business owner must look at.
These metrics can tell me immediately how the company is doing vis-a-vis any previous time period and, when measured against expenses, will give me the profitability of the company. But that is not exactly giving me the full picture, which, as a result, doesn’t give me the roadmap or information needed to improve or fix any problem areas.
So in order to help understand the actual sales number (which is really a result of a number of initiatives), I need to look at performance relative to what actually drives sales—which can be done from the sales side as well as the marketing side.
From the marketing side there are a number of things to measure (where are my leads coming from, how did they hear about us), and then you can get super-detailed if you are measuring specific marketing campaigns (such as advertising, trade shows, direct mail, etc.).
I am not going to delve too far into those as that could be an article (or articles all on their own), but rather focus on the three main buckets I try to stay on top of on a day-to-day basis: Traffic, Leads and Opportunities. I look at these daily because it can basically give me a snapshot of where we are, and I can put things into motion to improve.
Traffic really means visitors to a website. For instance, the number of visitors to our website can vary depending on whether we’re actively advertising, distributing press releases, going to a trade show, or driving existing contacts to a special promotion.
Traffic is directly impacted by a marketing activity or outreach, so if I’m looking at traffic and I see it is trending downward, I can put something into play to bring the number up.
Once someone is on our website, it is our job to engage them and drive some further activity—such as download a trial of our solution, request pricing, or request a personalized demo.
There is no point in driving someone to your website if there is not a compelling reason for them to stay and learn more about your offerings. It is really then up to our team to ensure that the content is relevant, timely, and entices the visitor to want to learn more. If a visitor then decides to fill out a form or request more information, then we will count that as a lead.
There is always a gap from the number of visitors to the number of leads, and that is where I focus from a marketing perspective. If we see from our traffic metrics that people are leaving after a single page view, then we will look at our content and try to improve it, rather than just trying to drive more traffic to the site.
I call this Minding the Gap (with apologies to our British friends), a practice that puts the emphasis on trying to make the most of the traffic we have before spending more money or time trying to increase the overall traffic number.
Turning leads into opportunities is where the sales activities come into play. Once our team gets a lead, then their follow up (phone calls, qualifying, scheduling appointments, etc.) will determine if that lead becomes a qualified sales opportunity.
To measure this activity you can look at number of phone calls/touches, number of conversions, etc. These tend to relate mostly to individual productivity rather than bigger-picture activities or campaigns, and are often some of the easiest to track and measure.
Qualified opportunities are what will ultimately result in closed sales, and the measurements around opportunities (besides closed/lost) would be average deal size, average time from opportunity to close, overall close rate, etc. Again, there are a number of things that can be tracked and measured, and for each company it may differ.
The main thing is to really be able to look at your metrics frequently, measure them often, and then take steps that equate to “let’s do more of this” or “let’s do less of that.” My best advice is to keep things simple and straightforward to start with, and grow it from there. TI