Six Business Numbers to Track Success

It makes sense to be aware of and track your main financial indicators. The more you observe what the numbers are doing, the faster you'll see what's working and what isn't and can take immediate action. There are six main business measurements that will give you a regular snapshot of how your business is doing. For each, we will outline what you can do to improve them.

Number 1: Gross Margin

Gross margin is the difference between what you pay for a product and what you sell it for. Look to improve your gross margin by:

• Increasing your prices. Make rises small enough not to impact possible demand where price-sensitive customers might switch if they see the competition as cheaper.
• Reducing cost of goods sold by using lower cost materials or different components where possible, without affecting quality. Consider importing if there's a significant cost saving for the same quality with no impact on customer perception.
• Researching lower cost providers or consider asking your current supplier to reassess their pricing (especially if you have a long-term relationship).
• Reducing waste. Conduct an exercise to spot areas where there's excess waste and then devise a way to minimize it. Recycle and reuse any waste materials you can and make sure your employees are doing so as well.

Number 2: Average Revenue Per Customer

This metric is about increasing the number of things customers buy from you. It can be products, hours, services, warranties, insurance—anything where a customer is encouraged to buy two things rather than one.

• Use the data from your accounting software or sales system to identify trends and plan promotions. Look at what your best customers are buying, think of other products or services that could be sold with them and tailor special offers to bring these customers in more often.
• Learn to up-sell and cross-sell. Think of the classic sales lines "would you like fries with that?" or "buyers like you also bought this." Consider complementary items customers could buy when making a purchase or how their choices can be impacted by what similar people to them have bought (think Amazon).
• Consider tempting customers to spend just a little bit more by bundling products or maybe offering them a reward, such as free shipping on orders of a certain amount.
• Focus on your "gold" customers, those responsible for high, profitable sales. Target the ones with the most potential and then develop a specific proactive plan for each of them.

Number 3: Revenue Growth

Steady, predictable revenue growth is the sign of a healthy company. Grow revenue by:

• Using in-bound CRM software to better predict who is more likely to buy from you and to set up lead generator tools or content to gather interested prospects.
• Developing new products or services for your existing customers.
• Creating a marketing plan to identify, locate and sell to new customers. Look for new distribution channels to expand your customer base, such as third-party selling (Amazon, eBay, iTunes, etc.) or your website.
• Franchising, especially if demand for your product or service warrants it.

Number 4: Revenue Per Employee

Revenue per employee can be affected by several factors, including average revenue per user and better systems, processes and automation. It's often useful for those businesses that sell per hour. To encourage higher revenue per employee, try:

• Making sure your staff have the equipment and training they need to do the job right and keep them informed about business performance and management decisions, especially those that affect them.
• Setting goals for your employees. Help them put a sales plan in place and then measure how successful it is.
• Regularly optimizing incentives for your employees to find out what they want and acting quickly on your findings.
• Making sure your sales data is transparent so everyone knows who's selling the most.

Number 5: Net Profit Margin

This is a measure of profitability. You can increase your net profit percentage by:

• Lowering your direct or overhead costs by looking around for better deals on things like energy, internet and telephones. These types of consumables have multiple providers where the product is generally undifferentiated (the internet is the same thing regardless of who hosts it for you).
• If your location isn't mission critical then consider moving where rent is lower.
• Reviewing your equipment needs. It could be that you're better off leasing equipment only when it's needed, rather than buying it outright.
• Looking at outsourcing some of your staff needs, such as administrative tasks like payroll, to companies that will charge a monthly fee instead of a salary.
• Making sure you swiftly collect money that's owed to you.

Number 6: Net Promotor Score (aka Customer Satisfaction)

Tracking customer satisfaction by asking for opinions, feedback and ratings can give invaluable indication of dissatisfaction (for remedying) and potential advocacy (for marketing amplification). Anything that improves the communication between customers and a business should lead to better decision-making.

• Analyze the market to identify trends and try to predict customer needs. Find out what people are saying about your competitors and use that information to improve the customer experience in your own business.
• Keep track of any customer complaints. Document who the customer is, what they were unhappy about, what was done to resolve it and if they went away satisfied.
• Make the most of social media to keep in touch with your customers and measure their levels of satisfaction. You can talk to them directly, ask them to engage in polls and surveys and incentivize them to go to your website. Optimize your marketing budget and track campaign performance by connecting apps like Google Analytics, Facebook, LinkedIn or Twitter.
• Use email to send out annual or bi-annual customer satisfaction surveys. Incentivize them to take part in the survey by offering a discount or small gift.

Summary

By tracking and improving these six variables, you should be able to improve your gross margin, raise the value of your average sale, drive revenue, build the productivity of employees, increase your net profit percentage and have happier customers.