In Part 1 of this post, we mentioned that the concept of “a watched pot never boils” can be equally true of a new business. Even if we don’t see the ultimate payoff of a large and sustainable profit, there are other factors that indicate the health of a business. In other words, you don’t need to see water boiling to know that it’s getting mighty hot.
Show me the money!
Women start businesses for many reasons, but ultimately, making a profit is the prime motivator. How to track the profit can vary according to the design and needs of the business. For instance, profit can be tracked on a daily, weekly, monthly, quarterly or yearly basis.
Tracking your daily profit over longer period (such as one month or one quarter) can show your financial viability and vulnerability during that longer time period, revealing patterns of ebb and flow along with any problems contributing to the fluctuation.
Tracking the daily profit also establishes patterns of past behavior, and it doing so, it helps identify problem areas earlier rather than later. Early correction of mistakes, errors or faulty processes will result in a significant savings over a period of time.
Costs per Sale
Another great parameter to measure is the effectiveness of your advertising. By using codes or other tracking methods, business owners can track the sales resulting from particular marketing methods and campaigns.
Tracking these factors not only results in knowing which marketing efforts were successful, it also allows you to measure the cost effectiveness of the sale itself. In other words, you can determine if the cost of the ad was covered by the profit made by all the units sold by that ad. Determining the costs per sale lets you compare costs and also helps target you’re marketing effectively.
Market Growth Rate
The market growth rate can be defined in several ways, but generally it tracks the amount of sales growth from a specific customer group within a certain period of time. This business metric not only lets you see your performance as it relates to your competitors, it also expresses the general performance of your product or service.
The important thing to remember is that these are all indicators. When assessed individually, indicators can’t always predict the success of a business. However, when indicators are considered as part of a larger picture, you can predict the success or failure of a business based upon the collective story they tell.
That symbolism of the water pot still holds true when considering indicators. If the pot is seated evenly on the stove, if the heat is turned on high, if there is water in the pot—if all of these are present at the same time, we can surmise that the water WILL boil, usually when we least expect it!
If you’re having difficulties defining your own performance indicators, please get in touch with me. I have years of experience in helping companies track these indicators, and I’d love to help you find your own.
My dream is to help you realize your dream, especially if your dream is a successful entrepreneurial business.