Small business owners should measure their company's success. That way, they can grow their business... [+] and address key problems within. Photo courtesy of Shutterstock.
As an entrepreneur, I know how important it is to see what works at your business and what doesn’t. Business is unpredictable, and about the only thing that you can count on is that everything continuously changes. You need to constantly measure your business performance so you know what’s successful and what isn’t. So, how do you measure small business success?
If You Want Small Business Success, Know How To Measure It
For over 30 years, I’ve been testing out new ideas at my company, Patriot Software. Being an entrepreneur is a journey. You’re always a work-in-progress, and you’re never finished.
You have successes and failures. Be prepared to measure your business so you can gauge your achievements and small business milestones.
Measuring Business Performance
Take it from me, you want to have a plan when it comes to measuring business success. Here are just a few methods of measuring business performance at your company:
1. Look At Your Business’s Financial Statements
When you think about measuring the success of your small business, you need to see how much money it’s generating. Obviously, money is important when you run a business. Without it, your business is done. With it, you can grow your business and continue pursuing your entrepreneurial dream. How much money is going in and out of your business?
The three main financial statements you can use at your small business are the income statement, balance sheet, and cash flow statement.
The income statement measures the profitability of your business during a certain time period by showing your business’s profits and losses. The balance sheet shows your business’s financial health, measuring how much you owe and own. And, the cash flow statement shows how liquid cash is at your business.
Measuring business performance means checking out the money flow of your business. If you want to see how profitable your business is, check out the financial statements.
2. Check Customer Satisfaction
One important measurement of small business success is customer satisfaction. If your customers aren’t satisfied after buying from your business, they probably won’t do it again.
How do you measure customer satisfaction? There are a few different ways, including through surveys, reviews, or even asking, “Did you find everything you were looking for?”
At Patriot, we pride ourselves on excellent customer satisfaction. We are all about reviews and making sure that our customers are happy with the software we provide. When we receive reviews, we post them on our company website. That way, others know what real people have to say about our products.
Customers help us improve our products. My customers know what they need, and I learn how to satisfy their needs by listening to them. Many of the features we add to our software are because of customer requests.
3. Average How Many New Customers You Get
Knowing how many new customers you get is a great way to measure your business’s success and predict growth. If your business is stagnant with the same 25 customers, you might need to kick up your marketing strategy.
See if the people buying from your business are existing customers. Develop a client list with email addresses to track customers. That way, you can easily count the number of new customers per month or year.
Average how many customers you get from each new business action, like adding products or upping your marketing efforts. By averaging your new customers every so often, you can measure how successful your business is at drawing in new people.
4. Conduct Performance Reviews
Let’s not forget about your employees. Employees are essential — without them, you would have a hard time running and growing your business. One way to measure business success is through conducting performance reviews to see how your employees are doing.
I try to conduct performance reviews twice a year. They let me see how happy my employees are at their jobs, as well as how effectively they complete tasks. Performance reviews help employees see what they need to improve and gives me further insight into their workload.
For example, you might have an employee who has extra time on their hands. Through the performance review, you find out that the employee is unhappy because they want more responsibilities. You can then delegate more tasks to that employee to make them happier and increase workplace productivity without increasing the number of workers on payroll.
5. Stay Current On The Market
Sometimes, you need to know how the market is doing in order to measure the success of your own business. If you and your competitors aren’t doing well, it might be because there is a lull in the market.
Don’t be down if your business’s profitability decreases. It might be a result of the national market and out of your control. Decreased profitability could be a good time to introduce new products if demand for your current product or service is put on hold.
6. Assess Your Own Expectations
How do you feel about the success of your business? According to one study, 55% of small business owners are satisfied with being a small business owner.
You might not think about it, but assessing your own happiness is important when measuring your business success.
When I measure my business’s success, I try to consider my perception. How do I feel the business is doing? I know the numbers are good, but are they where I want them to be? Make sure you’re happy with your progress to encourage all-around success.
As someone deeply entrenched in the entrepreneurial journey for over 30 years, I understand the dynamic and ever-changing nature of business. My experience at Patriot Software has provided me with valuable insights into the strategies that contribute to small business success. I've been a hands-on entrepreneur, constantly testing new ideas, and navigating the delicate balance between success and failure.
Measuring Business Performance:
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Financial Statements:
- I emphasize the critical importance of analyzing financial statements—specifically, the income statement, balance sheet, and cash flow statement. These documents offer a comprehensive view of a business's financial health, profitability, and liquidity. For sustainable growth, it's crucial to understand the inflow and outflow of money.
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Customer Satisfaction:
- Recognizing that customer satisfaction is a key metric for success, I advocate for methods such as surveys, reviews, and direct inquiries. At Patriot, we prioritize customer feedback, showcasing reviews on our website. This not only builds trust but also serves as a valuable tool for product improvement based on real customer needs.
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New Customer Acquisition:
- I highlight the significance of tracking the number of new customers, as it serves as an indicator of business success and growth potential. By maintaining a client list and monitoring customer acquisition from various business actions, businesses can refine their marketing strategies and assess their effectiveness.
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Employee Performance Reviews:
- Acknowledging the pivotal role of employees, I recommend conducting regular performance reviews to gauge job satisfaction and task effectiveness. These reviews not only empower employees to identify areas for improvement but also provide valuable insights for optimizing workload and increasing productivity without expanding the workforce.
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Market Awareness:
- Stressing the importance of staying current on market trends, I advise business owners to understand the broader market conditions. Recognizing that external factors can influence business performance, I suggest using market insights to adapt strategies and seize opportunities during market fluctuations.
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Personal Expectations:
- I bring attention to the often-overlooked aspect of assessing personal satisfaction and happiness in the entrepreneurial journey. Recognizing that success is not solely about financial metrics, I encourage business owners to reflect on their own perceptions of success and progress.
In conclusion, my extensive entrepreneurial experience has equipped me with a nuanced understanding of the multifaceted nature of small business success. These insights underscore the importance of a holistic approach to measurement, encompassing financial health, customer satisfaction, employee engagement, market dynamics, and personal fulfillment.
