In my last post, I shared five different ways you can protect your business during a recession. It is equally important that you monitor the performance of your business, tracking it against previous periods to determine if growth is slowing down, helping you make informed decisions and keep your business on the right track.
During economic downturns, business leaders need to pay extra attention to the performance of their businesses. In this article, I would be sharing the top 5 metrics you should monitor to determine.
Metrics to Measure Business Performance
Here are 5 metrics you should monitor to determine your business performance
- Financial Performance
- Customer Acquisition and Retention
- Customer Feedback
- Competitor Analysis
- Analytics and Customer Journey
These metrics are explored further below
1. Financial Performance
You should monitor key financials such as your income, expenses, margins, and cash flow. It is important that all your financials are recorded properly, to give you the full picture. For instance, you should use the accrual accounting method to match your revenue to your expenses. Your profit margins also inform you of how well your business is able to generate revenue to cover all expenses, helping you to identify product lines that are not doing so well and expenses that you need to reduce or eliminate.
2. Customer Acquisition and Retention
You need to monitor your customer data, including the Customer Acquisition Cost (CAC) which is the amount you spend to get new customers. This would include your marketing and sales costs and any other costs that are incurred to convince customers to use your service. You also need to monitor the percentage of your customers that continue using your services as this gives you an idea of the total value you get from your customers (Lifetime Value – LTV) versus the amount you spend to acquire them. The goal here is to reduce your CAC and increase your LTV while ensuring that you retain more customers.
3. Customer Feedback
The feedback your customers give would give you early indications of how well your business is doing and what you need to improve on to keep your customers. You should encourage your customers to give you feedback regularly, using tools such as Google My Business (now called Google Profiles). Take note of the issues raised and work on improving them to avoid losing more customers.
4. Competitor Analysis
It is important that you have an idea of what your competitors are doing. You can monitor their websites, social media, and other channels. You may also run market research to compare how well you are doing compared to your competitors. This would help you know how well you are doing and give you ideas of concepts you can try to improve your business’s standing.
5. Analytics and Customer Journey
You need to understand how your customers engage with your business and identify the pain points in the customer journey. You should map out the customer journey and identify the common channels that customers engage with your business and drop rates at the different points and what causes these drops. Analytic tools can help you monitor your website traffic for instance to better understand your customer journey, the pages your customers engage with, and where they drop off. You may also use tools like HotJar to record how your customer interacts with your web pages to help you understand what needs to improve. If your business doesn’t have an online presence, you can build your customer journey using surveys or by hiring mystery shoppers to help test your systems.
To make better decisions, you need to ensure that you monitor data points as this would help you understand customer behavior and business performance, and this would help you make better decisions.