Starting an online business is quite easy these days. eCommerce platforms and freelancers are happy to walk you through the initiation. If you have some cash to burn, a marketing company and a social media manager can help you get off to a flying start. With a little help from social media campaigns, the traction from that start can be easily carried forward to churn successful quarters after quarters. However, that doesn’t mean you will be in control and know how your business is performing. That’s a common problem, most successful small business owners don’t know how well they are doing.
To understand how your business is performing you have to keep an eye on the numbers. Tracking the performance of a business is similar to tracking the performance of an employee. You create a set of measurable goals that you’d like your business to achieve in a fixed period. Then determine if those goals were met or exceeded at the end of this period. This is essential for a business to remain successful over a long period of time. Let’s take a look at the five key performance indicators for judging a business.
- Growth Rate: The standard business practice is to determine how much a business has grown compared to the last year. However, monthly analysis offers a clearer picture of progress and helps in correcting strategies and campaigns without delays. A relatively new business can also analyze its performance by looking at its month to month growth numbers.
- Abandonment Rates: This is another important indicator as it gives an idea of where exactly sales were lost. Studying abandonment data helps a business understand what may not be working and if there’s a problem somewhere in the order flow. This information is used to optimize a website and improve conversion rates.
- Conversion Rates: A business must pay close attention to what is working and what isn’t. If a particular product or service is doing exceptionally well, it can be a candidate for promotion. Variants of top sellers can also be introduced to tap into the segment that your customers already love. Offerings that aren’t doing great can be changed, discounted or removed.
- Customer Acquisition Costs: Promotions can be executed in many forms. However, without keeping an eye on the cost of promotions, there isn’t a way to determine whether the customer lifetime value is higher or lower than the acquisition cost. Be it Content marketing or Facebook targeted ads, regardless of the platform, analyzing customer acquisition costs is important to determine the viability of marketing strategies.
- Return on Investment: Tracking return on investments is important to ensure that you are running a profitable venture. The basic rule of operating a business is that it must make more than its operational costs. A business doesn’t necessarily have to be profitable from the get go. However, if it isn’t generating an acceptable ROI over an extended period of time, then you may want to reconsider its viability.
Stay on top of your game by keeping track of these 5 Key Performance Indicators. Good luck.