If You Know You Know

Updated: Oct 26, 2022

The truth behind the metrics.

Recently I was listening to a podcast, and they said, “If you know you know” in talking about the metrics of a business. I don’t know why but that to me was like YES. If you know the metrics of your business and what they mean you will know if your business is successful, and how to make it successful. Small businesses post and engage and feel like they are doing all the right things, but have no idea what to look at to measure their success or progress.

KPI's (Key Performance Indicators)

Key performance indicators is the fancy name for the important metrics you need to be aware of. Without knowing these metrics or where and how to measure them, you will be posting, engaging and selling and have no idea the progress that is actually being made. Now, we know that metrics and numbers and charts aren’t the fun parts of being a small business owner but how disheartening would it be to be doing all the fun aspects of business and not actually be profitable. Below are some of the top KPI’s that need to be checked and monitored to understand the progress of your business.

Revenue Growth

Revenue yes, we are talking about that money coming in! We need to know that overtime your money coming in is growing. In the beginning of starting a small business we all know that revenue quickly goes out faster than it comes in. We have the startup costs and overhead (cost of supplies and materials to start). Overtime though you should be able to clearly tell as the business matures that your revenue is growing.

Most platforms now a days have ways of monitoring revenue whether through Etsy or Shopify or your website. It’s important as a small business to be vigilant of the money coming in vs. the money going out to maintain and run the business. Without watching the revenue growth, a business can quickly become not profitable and upside down financially.

Revenue Per Client

Speaking of revenue, we need to be looking at revenue per client. Do you know on average how much a client/customer brings in for you? This metric is important to know if your prices are in line and if you need to raise or lower your price per item/service.

If we look at how much an average client is spending, and over a period you see that everyone leans more towards your lower ticket items, you might want to evaluate. If over time you see that there is a mixture of high- and low-ticket items in your invoices, you know that you’ve honed in on the price range that your ideal client is comfortable with. The revenue per client is important in establishing what you need to be selling and for how much.

If you think that every client and customer on average spends $50, then to make $1000 you would have to sell 20 of those items or services. This ties into to knowing your goals and knowing what you are trying to achieve with your business.

Profit Margin

Profit margin is how much you’re able to buy something for compared to how much you’re selling it for. In order to make profits we need to keep a decent profit margin. If you’re buying something at $2 and selling it for $4 that is a 50% profit margin. That means that you’re able to make $2 profits on that product.

Most people understand this concept but don’t understand or do not price their products high enough to have a decent and highly profitable profit margin.

It’s a fine line to walk with profit margin as you don’t want to price your products too high, but you also want to make a return or a profit on the item or service. There are a variety of profit margin calculators out there that will help you see visually the profit margin percentage by typing in what you paid for the product and what you're planning to sell it for, to see the percentage of profit margin.

Return On Investment

This metric is important because it again makes sure that whatever you are putting into your business you are getting back out in profit and more. If we spend $100 in ad spend, we want to make sure that we get a return on our investment. We invested the money to become more visible to the public, but did we actually get clients or people buying or reaching out because of the ad. Ads get tricky because this again is measured on what your goal was for the ad.

Sometimes the ad or investment won’t be solely for profit. We can invest into our company or an ad for our company and be looking for things like engagement or reach. These things long term will hopefully get us profit but the return on our investment would look like 10,000 people reached not so much $10,000 made from the ad.

Return on investment can be measured usually through whatever platform you are using or making the investment in (Facebook ads, Instagram, email marketing). It can be measured through how many people are reached, engaged, how many sales were made, how many people signed up from the investment. Again, we have to be clear on why we are doing what we’re doing. Why are we making the investment?

Mind The Metrics

We know that metrics are tricky and can sometimes get confusing but its important as a business owner to take the time to understand them or to hire someone who does so that your business can be successful. If you know what your business is doing through the metrics and what your clients and how your clients and customers interact with your business through analyzing the metrics you will know how to better serve and ultimately be successful in your business.

Again like everything gaining value metric data will take time so be sure to be patient and make sure that when you are comparing data you gave the metric enough time. If you have more in-depth questions regarding your metrics specifically or know that you don't want to manage your metrics yourself click this link to schedule a 1-1 consultation today. Schedule Here