An Entrepreneur's Guide to Measuring the Metrics That Matter

22 JUL 2010

As part of the overarching activity of running a business, an entrepreneur and his team usually create thousands of little assignments for themselves.

They:

  • Write blogs to generate traffic to their web site
  • Place ads on the website so people can see what is for sale
  • Create product and service descriptions on their site
  • Create Buy Now buttons that link to a place people can enter credit card information
  • Post links to articles on LinkedIn, Facebook, Reddit, etc
  • Tweet links to products, services and blogs to friends, family and business associates
  • Go to conferences to learn how to create better products
  • Etc, etc, etc.

These daily assignments, often made up on the fly without much thought, are executed day in and day out month after month, year after year.

A Less Painful and Dangerous Way to Run Your Business

While a new business may need to flounder around a bit and try new things in order to get on its feet, once it starts to acquire customers and generate revenue, it needs to take a less intuitive approach to running itself. If it doesn’t, it will tend to have very high costs and relatively low revenue.  This is dangerous because it never gets strong enough to weather normal economic setbacks.

If you were to make a list of the 100 things you and those who work with you spend most of your time doing, you would likely discover that more than 90% of the tasks you undertake have no proven economic value. You think they help generate money, but you can’t prove it.

Don’t believe this describes your business?

Take a moment to look back over the last six months of revenue.  Look at all the income that came in.  What activities led most directly to that revenue generation? I bet those activities take up only about 10%-20% of your time.  How would your revenue picture change if you spend 80% of your time doing just those activities and dropped everything else?

Count the Metrics that Matter

In your business, you have to count the metric that matters.  For most small businesses, it is revenue generated.  Not customers, not blog readers, not products produced, not services rendered.  It is the amount of money that flows into the business through activities the business undertakes.

If you could get money without customers, without blog readers, without products or services, that would be great.

Generally you’ll find this impossible.

For example, you usually need the number of customers to go up for revenue to go up . . . but you may not have to increase the number of blog readers, blogs, ads, website traffic, number of products you generate or services you offer.  If increasing those metrics doesn’t measurably improve your revenue, why increase them?

What you count, goes up.

Make sure your business doesn’t measure its success in hits and bounces, in clicks and links but in cash. Because otherwise you and your associates are almost certainly wasting most of your time on stuff that doesn’t make you money.

 

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