Identifying Your Business Metrics, by Rose Hill

Many solo-e's run their businesses in the dark, never knowing what, if any, effect their actions have on their business success. They spend time, money, and energy developing a plan for marketing or business development, that, once completed, they at best only review on an annual basis. And if their actions are not having the desired result, 6 or 11 months later is too late for an effective course correction.

The continuous use of effective business metrics and the systematic tracking of them will keep your business on course throughout the fiscal year. This process can decidely accelerate your success, yet it needn't be onerous or time-consuming for you.

Let's start with a definition:

A metric defines a measurable aspect of business that can be directly affected with specific action.

The two most common ways to use metrics are:

~ Comparing actual data against an ideal benchmark. This method can be used to show the need for risk reduction.

~ Reviewing data over time. This methods shows trending and can allow mid-course corrective action.

In life, when you review your cholesterol level with your physician, you're reviewing a numerical representation of the health of your vascular system against an ideal benchmark. That's an effective metric allowing you to take action to reduce your risk of getting a heart attack from clogged arteries.

In business, when you review a trending line of billable hours week-by-week over a year for your primary service, you're reviewing a representation of the health of your business. Any negative trending in this data allows you to take action to turn your business to higher profitability.

Without the appropriate metrics in place, you're only guessing about what actions you need to take if your business wanders off course or declines in health. And knowing which actions directly contribute to your success saves you time, money, and wasted effort.

But where do you start?

Start by identifying the success factors for your business by asking yourself some key questions, such as:
What is the lifetime value of my average client?
Which service is most in demand?
Which service provides the highest profit margin?
What is the cost for acquiring a new client?
What percentage of visitors to my Web site subscribe to my newsletter (ezine)?
What percentage of participants in my free teleclasses sign up for the full program?

Once you've developed a list of your success factors (in the form of your key questions), you must then evaluate each further by asking this set of questions:

Does this success factor significantly determine my business results?
Can this success factor be measured accurately, consistently, and easily over time?
Can the results of this success factor be influenced or changed by at least one specific and direct action I can take?

If you answer "yes" to all three of these evaluation criteria, your success factor is an effective metric for your business.


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