What You Measure Improves

success comes from doing the simple things consistently. If you really want to know how the most successful businesses get built, I’m going to give you one of the most important answers right now. (actually this article involves TWO critical ideas that fit together, which I’ll point out at the end of the article..) If you actually listen carefully and start to apply this simple idea, you’ll find that it has almost magical powers over helping you improve your business in a dramatic way. It’s the title of this article, but let me repeat it because it’s so important — “what you measure, improves“. My experience is that EVERY time I begin to measure something and keep track of it, that “thing” begins to improve and move in the direction of what I want.  Every. Single. Time. I’m talking WITHOUT actively trying to improve it. Most of the time, I don’t have to make any conscious choice to focus on improving what I’m measuring — it just improves because I’m paying attention to it. It’s actually kind of spooky, because the mere act of measuring doesn’t seem like it should really make any difference to the outcome.  But it does.  A popular mantra in the self-help world is “what you focus on expands” and this is a similar kind of thought. It’s powerful.  It’s effective.  It works. As it relates to business, most entrepreneurs make two fatal mistakes when it comes to measurement of their business and it’s metrics: 1) They measure their success based on the wrong numbers 2) They don’t measure enough numbers Let me ask you a question — answer this before you move on with the article ..

What number do you look at when trying to determine if your business is successful and growing or not?

It’s very likely you answered this question as most entrepreneurs do .. with one of 2 numbers. Either you said revenue (sales) .. or you said profit. And while these numbers are certainly relevant to your business, the issue is that both of these numbers are VERY difficult to change on their own. In fact, if you think about, revenue and profit are simply the results from a lot of other things going on in your business.  They’re what economists call “lagging indicators”, because they are what you can see after the fact (not before). Put a different way, revenue and profits are the EFFECT that you get, not the CAUSE. It’s like losing weight — your weight is the effect, and what you put in your mouth, how much exercise you get, how much sleep you get, etc. — these are all the causes of what number you see on the scale. Once you step on that scale, it’s too late to change the number.  So it follows, of course, that if you want to change the effect, you need to focus on the causes of that effect. Back to the business discussion, I’ve observed that most entrepreneurs manage and measure their business by looking only at their sales, or at their net profit, or at both. But very few entrepreneurs look deeper into their business to understand the causes that are creating those numbers to result. The whole online/internet marketing world is notorious for this.  Most people brag about all of their top-line numbers – “we’re a 7 figure business!” and “my company will do $10 million dollars this year!” Problem is, most of the so-called gurus are not keeping very much of those big numbers. So, don’t get caught up in thinking about your business solely from a revenue perspective.  That’s what amateurs do. The core problem here is that if you’re doing this, it becomes very difficult and overwhelming to decide how to improve your sales and profits.

> Should you spend more money on a radio campaign? > Should you hire a social media manager ? > Should you fire 1/2 your staff? > Should you re-design a new website?

Who knows. And this is where the Paralysis Spiral begins — you become paralyzed because you don’t know what to do, because nothing’s obvious.  So you do nothing, and continue to languish with mediocre results.

How To Figure Out Your Critical Numbers So You Can Measure (And Improve) Them

The mindset you want to have is this: Instead of asking “WHAT are my sales and profits” .. ask yourself the question, “WHY are my sales profits what they are?” Your job as a business owner is to understand WHY your numbers are the way they are, and then to investigate how to affect those things that are creating the results. Every business has a handful of “critical drivers” — these are those numbers that tell the story of how your business is working (or failing), without even knowing what the sales are. For example, in our online business (SimpleWealth), here are some of the key metrics that I measure and monitor carefully – because they help me predict the future in terms of where our business is going.

• > Email open rate – how many people are actually opening the emails we send? (this tells me the overall engagement and “health” of our list – are people paying attention to us, or not even bothering to open up our emails?) 
• > Email click through rate – how many people are clicking one of the links inside each email that is opened? (are we doing a good job creating strong enough copy that causes someone to be interested in what we are talking about in our emails?) 
• > Promotion partner opt-ins – how many people from our community have opted into a promotion from one of our partners? (if we’re sending traffic to a partner and the number of our people choosing to opt into their list is really low, we know very early on that promotion is likely not going to do well for us)

A completely different example is the service business that I’m in the midst of growing very quickly right now. (by the way, that’s the key here – every business has it’s OWN drivers, and it’s your job to figure out which ones are the most important to watch). In my new business, here are the key metrics that I am watching carefully, which help predict how we’re going to do that month and going forward:

• > What are the daily sales we are achieving each day? (we then use this to extrapolate and predict a revenue target for a given month that becomes pretty accurate within the first few days of that month)
• > How many phone calls did we receive each day? (not only does this help us see if we’re getting busier or slower, we use this information to adjust staff schedules, phone system operations, etc.)
• > How many appointments did we schedule each day? (I watch how many appointments we have scheduled each day, both by new clients and existing ones, which transmits how busy we are day to day, week to week)
• > How many new prospects entered our marketing funnel each day? (new prospects are the lifeblood of business growth, so knowing whether we are achieving our goals on a daily and weekly basis is critical)
• > Where is each new prospect coming from?  (we work very hard to track every new client in terms of where they found out about us, which gives me massive leverage in making marketing decisions)

Every day, I get a summary email from my team that details most of this information. Every day. It immediately allows me to take the pulse of the company, and know how we’re doing. This is called a “Flash Report” or a “Dashboard”.  The whole purpose (like a car’s dashboard) is to give you a fast, easy to read synopsis of how your business is operating. You can then quickly identify areas in your business that need more attention .. and you can focus in on those areas and resolve problems or bottlenecks very quickly. For example, with the 45 second review of a Flash Report .. > I can immediately see where we might not have enough staff working to deal with the number of inquiries we’re getting > Day to day, I can see where our new clients are coming from (and which marketing methods are working – and equally importantly, NOT working) > I get an immediate sense of how much business we’re generating, and what kind of week and month it’s going to be > I see instant results of marketing campaigns or efforts we’re trying so I know right away whether a specific strategy generated results It’s really one of the most powerful things you can do for your business to grow it — AND to help reduce your own anxiety because you finally don’t feel like you’re “in the dark”.

How To Get Started – The #1 Thing To Start Measuring

It’s hard to say what is best for you since every business is different.  But assuming your business relies heavily on new clients calling, emailing, ordering, or coming through the door, then I’m going to suggest a KILLER metric that you must know in order to be effective with your marketing. The first thing you should start tracking religiously if you’re not already .. and I mean WITHOUT exception .. is “lead source”. That’s a fancy way of saying “where are your prospects and clients coming from”. I get asked all the time about which marketing strategies I think people should use in their business. The answer is really simple:  “the ones that work”. Problem is, most business owners have 5 different things they’re doing, and they have NO idea how much each one of those individual things does to bring in new leads or clients. Think about the last 20 new clients that you brought on – people that gave you money.  Where did each of those 20 people learn about you or come from? If you can’t answer that question (with DATA and not just what you think or feel), then you need to start tracking. If you’re an online business, this should be relatively EASY to track. If your prospects and clients normally call you on the phone, then it’s as simple as putting a clipboard beside the phone and insisting – demanding – that whoever answers the phone asks this question of EVERY single new prospect or client: “Where did you hear about us?” I guarantee, if you’re not already doing this, you’ll be blown AWAY at what you start to learn about your business, your customers, and where you need to focus your marketing energy.  

Summary

I told at the beginning of this article there are actually 2 powerful ideas that I’m talking about here. The first, of course, is that anything you measure improves. But there’s another powerful idea underlying this:  measurement eliminates argument. Whether it’s arguing in your own head or with someone on your team about what you should do or what’s working, when you begin measuring things, it eliminates the argument you often run into. > Is that ad you’re running in the magazine a good idea or not? > Should you hire another team member, or should you actually be getting rid of someone in that area of the company? All of these kinds of questions become a LOT easier to answer when you have actual, real-life DATA to consider. And you can’t generate that data until you begin to measure. So, today’s the day.  Pick something – ONE thing – in your business, and begin measuring it. I promise, you’ll be stunned at what happens when you do.   What are you to start measuring that you haven’t before?  Post a comment below and tell me what you are going to start measuring TODAY!  ]]>