Measure Small Business Success: Everyone wants to make more money, particularly if it is their own business. They are always eager to count their profits after the day’s sales, even if their business is small. The saying goes thus; “A drop of water becomes an ocean.”
It means that no matter how small a thing is, it becomes a big thing if one is passionate about it.
In response to the title of this article, in measuring your success in any business you venture into.
What Are the Key Metrics for Small Business Measurement?
For small businesses and startups, the most significant indicators are revenue, operations, and customer service. Each important statistic is supported by lesser metrics that indicate its performance based on the nature of your firm and your business objectives. Let’s break it down:
Sales Metrics:
- Increased revenue – Aim for 10-20% per annual
- Profit margins of 10-20%. – Aim for 10% to 20% margins.
- Customer acquisition cost
- Customer lifetime value (which should surpass acquisition cost) ]
- Average order value
Operational Metrics include:
- Inventory turnover
- Net promoter score
- Product return rates.
- Defects per Million Units
Customer Service Metrics include:
- Response time
- Resolution time
- Satisfaction
- Retention
- Complaints.
Read: You Just Lost Another Customer Because You Are Yet to Learn This Customer Service Secret
Ways To Measure Small Business Success
1. Business Financial Statement.
This means reviewing your business profits from time to time to see if the business is depleting or booming. If a business is booming, making profit at a bit higher rate than what you are to sell in an average day.
Take for example: Roasting food business. Miss A roasts Plantain, Corn and Groundnut by a road side. In an average day, she makes a sale of $1,000 daily, but on this particular day, if she makes like $1,800 to $2,000 daily due to her friendly client service, tips and a rush hour day.
If that increased sales keeps on coming up frequently, then her business is booming. Mind you, no business booms if in a given period of time, the sales of business is static. No matter the amount or quantity of sales you make. It must fluctuate, either higher or lower.
2. Customer Satisfaction.
As the slogan goes; “Customers are always right”. This means in every condition you find yourself with a client no matter how crude the client could be, the client is always right, and you as an entrepreneur, should be patient with his or her sense of being ill-mannered.
Customer Satisfaction must be the utmost priority of the business. Because without clients, business cannot thrive. To measure the success of a business, there must be the utmost satisfaction of each and every client.
Read: You Just Lost Another Customer Because You Are Yet to Learn This Customer Service Secret
3. Customer Census.
This is having a list of the average customers you get. The more the customers, the longer the success thrives. An entrepreneur will always keep in mind or in the record of the average customers they get to determine the success of their small business.
4. Checks and balances on the entrepreneur.
The entrepreneur that seeks for success in their small-scale business should also run a check and balance on their small-scale business. That is reviewing their performance conduct to the business itself and everything surrounding it.
5. Be Conscious on the Market Situations.
It means that the entrepreneur should always be aware of any recent happenings in the market. The markets situations changes the course of actions in Entrepreneurial businesses. Also, an entrepreneur should also have foresight of things that could happen in the market because of the current issues.
For example: If Mr Jude has been seeing and watching the news on the falls of the economic market, and as a small-time caterer, which knows that Flour would be scarce or is already scarce, instead of brooding on Flour because of it’s scarcity and it’s high inflated price, he could get potatoes or other flour making ingredient to replicate flour and bake his normal foods.
In this scenario, he is a step ahead of the economic crisis because of his sensitive nature to Market news. Hence, even the Potato flour would give another taste that prospective and existing clients would like, therefore boosting his small-scale business despite the economic crisis.
6. Estimate Your Boundaries.
Every business has its limits it can reach, and it can only expand and progress to other things. Take, for example, the Dangote Business.
They produce; ‘Sugar, Noodles, Spaghetti, Salt and so on’. At first, the business started producing Cement, then venturing to produce other food items. So what I said above about businesses and their limits, Dangote company can’t produce Noodles to taste like Spaghetti or Salt to replicate Sugar.
They can only diversify other products but not be used to replicate another thing. So it is for small time entrepreneurs whose aim is determining their success in their small scale business, they should estimate their expectations.
Their boundaries must be defined, no matter how much they want to improvise their business or products, it should be another, other than their existing products. For example, Tiger produces Curry including Thyme. Both are different with different purposes.
You either use one or both, but you can’t use one to replicate the other. They both go hand in hand. So that is what I meant: that whatever thing the entrepreneur does in booming his business should be assessed to his expectations.
7. The Cost of Growing Customers.
To measure the success of a small scale business, as I said in the first way, my point is that a business booms when the profits aren’t static. So it applies to every business.
Your day-one client can’t and shouldn’t always be your day-one client. Clients have to increase through a given period of time. Because profit has to flow from everywhere and at any angle. Client growth is a way to measure the success of small-scale businesses.
8. Tracking Profit Margin.
An entrepreneur must follow track of it’s Profit margin. Profit margin is the ratio of net income to net sales of a company expressed as a percentage.
In layman’s terms, it is the profits of everything after bills, taxes, returns, discounts, and other miscellaneous items, including damaged or lost goods of companies, that have been paid.
The remaining money left after all these bills is the Profit Margin. Okay, so after this definition has been clearly understood, even a small-scale business too has bills to pay, which gulps much money from the business, if the profit remaining is good enough to call it a thriving business then it is successful. So, an entrepreneur needs to monitor his profit margin records.
9. Tracking the Gross Margin.
Gross margin is the difference between revenue and direct cost, otherwise known as the ratio of gross margin per cent.
It is just about the difference between the profit incurred on an investment (Entrepreneurial) and the sales an entrepreneur must track. By doing that ensures monitoring the success of his small scale business.
10. Customers Adverts.
You know, like Coca-Cola, it has gotten to the level where people will be like “Oh, I like Coke, it cools my nerves”. or “Drink Pepsi, the taste itself is refreshing”.
This here means that Coca-Cola is an international company, where their consumers knowingly or unknowingly advertise for them without Coca-Cola paying them, because they have gotten to that enormous extent.
However, since I’m discussing the ways to measure your success in a small scale business, for your clients to advertise for you in like manner, your business must be unique, i.e., it sets you apart from others in the trade like you. Two, it must be integrity based and Three, it must be something catchy. Something that rings a bell leaves an everlasting taste or experience in them.
There was this funny joke about old women frying Akara and puff-puff (Nigeria street snack) by the road side. People will queue from a long distance to patronise the Akara without minding the road condition or the sanitation basis. All they wanted was the taste, the aroma, just waiting patiently to munch it all.
Even as a small-scale business, people rushed and advertised like they advertised drinks, showing superiority over others. E.g. ‘Pepsi is for small boys, real men drink Hennessy’.
If, as a small-scale entrepreneur, clients advertise your small business like that, then that is one way to measure your success in a small-scaling business.
11. Volume and Frequency of Sales.
These are indicators of company success in several sales. It is a way of measuring the amount of sales sold to new and existing customers, including the profit per sale and the average amount transacted during each sale.
If an entrepreneur can be mindful and take into detail the number of sales made on a given length basis and measure his profit, it would definitely count as a way of measuring the success of a small scale business.
12. Owners Satisfaction.
You know that anything a person does to People must first satisfy the person first if you notice my second point in this article where I raised the client Satisfaction.
If the entrepreneur tries his best to satisfy the clients and gets nothing back in returns like profit or finds out that despite his efforts, nothing yields.
It would be very difficult for the owner of the business. The owner must be satisfied in all ways.
It is one of the common ways of measuring the success of a small-scale business. The business will succeed if everything runs smoothly and is even on both sides.
Conclusion
In conclusion, The entrepreneur should always Follow the money and be careful of his finances. Following the money implies ‘Tracking the course of his business finances’ while being careful of his finances, which means avoiding miscellaneous items.
For most small-scale businesses with no insurance that have management issues, any cost on miscellaneous items will be taken from the business finances, which will, at the end of the day, reduce its profit, which is bad for the Enterprise.
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