It’s time to take stock. At the beginning of our 10 Steps to Grow Your Business, we start by walking you through a reality check. We’ll help you build an accurate and complete understanding of your business’ current status. So armed with these tools to build your business, you can then formulate strategies to realize your vision of success.
HERE ARE THE FIRST STEPS TO TAKE:
- Establish Key Metrics
- Understand Your Financials - Review Margins, Cash Flow
- Review the Competitive Landscape
- Consider Customer Surveys
- Use Online Analytics
- Revisit Assumptions from Your Business Plan
Establish Key Metrics
The very first thing to do before plotting a course for growth is to set up the key metrics of your business. “Metrics” are basically crucial statistics by which you can measure how well your business is performing.
Among the key metrics to consider are money-related metrics, customer-related metrics, product development-related metrics and team- and operations-related metrics.
For example, a customer-related metric might be, “Conversion rate of Web site visitors to purchasers.” Is 5 percent satisfactory or do you need a higher number like 15 percent to generate the revenue you’re seeking? Knowing this metric may enable you to make adjustments to your online strategy that could be very powerful to your business.
A financial metric might be something like, “Monthly cash flow.” You may need to achieve and maintain monthly profitability by end of Q2, for example, and if you don’t, you may have to reduce your spending until the situation is rectified.
Or how about an operational metric, focusing on inventory turns? This is all about how quickly you move product out the door. Knowing this will help you understand how long you can expect your money to be sunk in merchandise instead of being available for other business activities, like meeting payroll.
Critical aspects of creating key metrics include:
- Choosing those things that have a significant ripple effect on the performance of your business.
- Ensuring that the metrics are measured over time.
- Having quantifiable measurability so you can be sure you understand whether or not you’re performing.
Understand Your Financials
We used to view our financials as one of the most dreaded aspects of our business. But that all changed as we realized that there was not only sanity, but opportunity waiting to be uncovered inside those financials.
The sanity comes from being so in tune with your business that virtually nothing takes you by surprise. You’re always able to see where you’ve been, where you are and where you expect to go according to cold, hard data.
The opportunity comes from knowing when and where it’s possible for you to spend more to make more, or to spend differently to make more, or maybe even to spend less to make more.
A great way to use financials is to always compare your actual performance during any given month to your projected performance. Having those two numbers side by side is always a sobering experience.
Additionally, here are some key things to know (and be sure you establish) in your financials:
- Your highest margin activities.
- Your primary triggers for cash flow problems.
- A deliberate classification of variable vs. fixed expenses.
- Any cyclicality in your business.
- Any major expenditures you see on the horizon.
After this analysis, if you hear yourself saying, “Uh-oh, I’m going to need to find some money,” visit Step 7, where raising money is covered in more detail.
Review the Competitive Landscape
You have to determine what the competition is doing and how the market landscape might be changing. Knowing this shifts power into your hands.
As you gather this information, look for those businesses you believe are the smartest players in your space. Figure out what makes them outstanding. Then compare them to you – how do you stack up? Also assess what’s weak about the competition. What opportunities are they clearly leaving on the table for you to scoop up? Next, create a list of things that have to be transformed in your business in order for you to grow.
And beyond individual competition, what about the market in general? We’re always trying to stay abreast of overarching market trends. Change can be a great thing for you, but only if you know it’s coming. Be sure your business and what you offer are positioned in the path of where the whole market is moving.
Consider Customer Surveys
To become more attuned to what your customers are thinking, feeling and wanting, don’t hesitate to ask them to fill out a survey.
Surveys collect information – whether online, or in the form of a questionnaire handed or mailed out to customers. They’re always voluntary, though some survey techniques yield better results than others.
A great way to get more people to participate is to provide them an incentive. Try to provide a “value exchange,” where you provide a valuable incentive that’s proportionate to the value you get from the survey. We once gave free copies of Microsoft Office software to online survey respondents, and the effort was not only a success, but a quick one. In just one weekend, we collected all the data we were seeking.
The information collected in surveys can be used in many ways but, first and foremost, to gain insight about your customers and how you might be able to serve them better.
One not-so-obvious benefit of surveying customers is that just by asking them questions, you’re showing your customers that you care what they think. That can have positive ramifications as they make future purchasing decisions.
As for providers of online surveys, consider using Survey Monkey or the “Create a Poll” function in our Community Forum.
Use Online Analytics
Part of the beauty — and breakthrough — of using the Web for your business is that it enables you to know with unprecedented precision exactly what’s going on with your customers. Online analytics software allows you to track activity and develop reports about customer behavior on your Web site with incredible detail.
Using this information, you can then draw all sorts of important conclusions. For example, you can rank which sites people are coming from to visit your site (and maybe advertise there to drive even more traffic). Or you can learn which pages people visit most on your site (and make more pages like those). If you’re wondering how to increase the conversion rate of shoppers to purchasers, you can find out exactly where you’re losing people in their shopping process and cook up ways to sweeten the incentive for people to follow through and make a purchase.
Using online analytics, you’ll be able to finesse the products you carry, how you present them, and the offers you make. Basically, armed with this tool, you are in the know and much better positioned to grow.
To make the most of your online analytics, you can create what we refer to as “a dashboard” – a summary report of the information you’ve customized the software to gather.
Some analytics products are pricey and complex; some are free and simple. Typically, their capability and quality are directly proportional to their cost.
Revisit Assumptions from Your Business Plan
Remember that business plan you created to launch your business (you did create a business plan, didn’t you?!). Well, it’s time to get it back out and pore over the key assumptions that drove many of the financial and strategic initiatives included in it.
To make the assumptions as reality-based and productive as possible, use all the info you’ve gathered from the action items provided previously in this step.
Going forward, revisit these assumptions quarterly. If you notice that the assumptions are out-of-date or simply off base, update them and see what ripple effect that has on your financial picture. And how does that affect the core marketing, product or operational strategies of your business?