Module 7 of the Rich Schefren Strategic Profits coaching program covers a very important topic – business metrics. As I type this, the metrics module is fresh in my mind because I only recently finished listening to the audio call with Rich.
The metrics module is intense. I was blown away by all the different areas I could measure, but of course I realize in order to capitalize on new ideas it’s best to pick two or three that you can implement straight away. Rich confirmed this, noting that you should pick only the most critical metrics that are at the center of your business.
How Do You Make Decisions?
Without metrics a business owner has weak options when it comes to making business decisions. If right now you don’t have any metrics you are making critical choices without any guidance other than a hunch or feeling or feedback from someone who might run a business, but isn’t in the same situation as you are.
I know this is true because that’s exactly how I make decisions when it came to my business. I look at all the different marketing options available to me and while I can make sound “assumptions” about demographics I might tap with each advertising medium, I really have no way to accurately assess how much to invest or what outcomes to expect.
In the past I’ve fired away money at random, testing different methods just because I thought they should work (see How To Throw Away $500 for example). I would choose an arbitrary investment amount and see what happens. If I made money, great. If I lost money, then I didn’t use that method again. Not exactly the most strategic decision making process.
While I don’t begrudge anyone who uses trial and error in marketing – I think there is an element of that no matter what you do when you test something new – I’ve since learnt that if I have certain numbers available to me I can make decisions that rely less on my emotional state and logical assumptions, and more on clear cut metrics.
If the numbers work they work, if they don’t you make changes until they do. As much as I hate the math, knowing some core data can make decision making a lot easier and provide clear cut results.
Think about the following decisions in relation to just marketing –
- Do you know how much it costs to acquire a customer using your current system?
- Do you know the average lifetime value of a customer?
- How about your conversion rates at each point of your sales funnel?
After listening to Rich’s call I realized at the very least, starting with just the data I have available to me now, I could calculate some key metrics for my business, BetterEdit.com.
- How much was the average essay editing customer worth to my business over the past year, quarter and month?
- How much was the average thesis editing customer worth over the past year, quarter and month?
Using just those two numbers I know some important realities and have numbers to use to make important decisions, for example -
- Should I focus more on acquiring new essay or thesis customers?
- Is the value of a client to my business increasing or decreasing over the previous time period?
- If I adjust my pricing structure does it decrease or increase the value of a customer?
- If I spend X amount of dollars on an advertising method and I convert Y amount of clients, then I know over the lifetime how much I can expect to earn for every dollar I spend.
That’s just a small set of examples. Rich provides literally hundreds of different metrics and how they impact all kinds of business decisions, including not just data directly related to sales – he discussed other areas, like personnel (employees), where you could gather key metrics to aid in decision making.
A problem I have had in the past is how I assess the effectiveness of a specific advertising tool. Since I don’t track the lifetime value of a customer presently, I only have rough numbers in my head of how much I invest to advertise and how much revenue I generate in the next few months as a direct result.
Since a customer might buy from my business over multiple years, I need to know what the lifetime value is in order to accurately assess whether the advertising method is profitable, which might not be the case this month, or next month or even this year, but in three years time when I have realized the full value from every new customer that advertising method brought in.
Just knowing that one number gives me a much better tool to gauge how healthy my business is and helps me to make critical decisions, like where to deploy my very meagre advertising budget.
How About Your Business?
I suspect you could benefit from knowing a few key metrics that drive your business. Remember you don’t have to go crazy with numbers, just two to three core numbers – KPIs (key performance indicators) as I remember them from business school – can provide you with some tremendously valuable data and enable you to make sound decisions when it comes to the strategic direction of your business.
If you are interested in learning more about business metrics, then I recommend you join Strategic Profits. A reminder that this weekend Rich is broadcasting a live web seminar as part of the launch of his next coaching program, which I know for a fact contains the metrics module.
To sign-up for the free seminar and be the first to know when the new program becomes available, go to this page -