GUEST ARTICLE: John Munnery - what metrics measure business success?
What metrics can be used to measure business success?
Managing a business can be extremely rewarding as you nurture a fledging business into a commercially viable entity that is profit rich, ambitious and on track to disrupt the market. As the business establishes a customer base, gains experience, and builds a reputation, you’ll need to track progression, the speed and height of this progression, and plot a strategic route the business can follow to reach its full potential.
To have a good measure of success is what sits at the heart of a progressive business, as without this, the business will lack ambition and a clear goal that it can aspire to achieve. A business success metric is a measurement that can be used to track business success or factors that contribute to business success. These metrics can also help set realistic targets that are quantifiable which can be used to draw month-on-month and year-on-year progress comparisons.
Business success metrics
There are a host of metrics that can measure business success, some are universal, and some are individual to the business. Although this process can be educational and rewarding, the data gathering process can be overwhelming if the strategy is not targeted. Jon Munnery of UK Liquidators, company liquidation and business rescue specialist, takes you through essential metrics to measure business success.
Website traffic – If it’s a business with a digital shopfront, you may track website traffic and seek a granular view of this data to assess the quality of the traffic, such as:
Unique visitors: The number of new users that visit a page
Bounce rate: The rate at which users leave a page
Conversions: How many times a user completes a prescribed activity
The number of new and returning visitors can help judge the quality of your website, your appeal and online popularity.
Return on investment (ROI) – Return on investment can be measured once you calculate how much income is generated, excluding set-up and conversion costs. For example, if you invest money in an online pay-per-click campaign, check the conversion value of the lead, minus overheads.
Financial benchmarks – If income increases because of an uplift in sales or you incur a loss due to a drop in income, the cash in the bank will mirror this. Many financial benchmarks measure business success, such as net income, which is how much cash is in the business after deducting expenses from revenue.
Reputation – If your business depends on brand reputation to attract customers, how can you measure this? Genuine customer reviews can help spread word of mouth, drive referrals and build a positive brand image. Referral schemes can also help accurately track how many customers sign up for your services on the back of recommendations.
Customer base – If the definition of success to you is volume, for example, the number of clients, number of active cases, or number of sales, track your customer pipeline at each stage to get an accurate figure.
Business success metrics will vary per business, industry, and sector. While you may choose to measure areas of the business that reflect success to you as an individual, such as product development or employee satisfaction rates, you may extend the areas that you measure, such as profitability, client numbers or business value for the attention of stakeholders.
Jon Munnery of UK Liquidators