Measurement button


I’ve never been big on measuring things. In fact as a cook, I rarely measure anything. I usually just eyeball my ingredients and cook to taste.  In the kitchen, that works just fine. I’m a pretty good cook and people usually love whatever I make. On the contrary, in business, I find that doesn’t work well at all. A lot of entrepreneurs I run across have the same philosophy in business that I have in cooking, and that’s not good. Many entrepreneurs do not measure anything in their businesses and in turn, do not see the results they hope for.


In business, measuring things really helps you to focus on results. Being able to track and measure the success of your business is not only necessary but critical to your overall growth and sustainability. In business, as the owner or sole proprietor knowing your numbers is very important because it allows you to know what’s working and what isn’t.


Many entrepreneurs have no trouble creating products and services to sell. But few understand how to run a business like a business not a hobby or project. I can attest to this first hand. When I first started my business, I didn’t know what I didn’t know and I basically ran my business like an expensive hobby. It took me a few years of research and hiring coaches to finally understand that I had to change some things if I wanted to stay in business. If your goal is to grow your small business, as the owner or head honcho in charge, you can’t afford to ignore business metrics. If you do, it will come back to haunt you. Below, I’ve listed 10 critical metrics to help you measure and grow your business for success.


  1. Total Sales Revenue – Sales is why any business exists. Of course since a sale is the exchange of goods and services for compensation, if you’re not selling you don’t have a business. Total sales revenue is what it is all about. To calculate total sales revenue, you add up the total amount of sales earned, minus the cost of things like undelivered merchandise or commission which will give you a total net number. The difference between gross sales and net sales are expenses acquired to achieve the sale. In order to be successful in business, you must know the total amount of gross and net sales you achieve on a weekly and monthly basis. Because nothing happens in business until you have sold something, nothing is more important than sales revenue.


  1. Customer Retention and Loyalty – These days in just about any industry, the competition is steep. That is why it is so important to retain as many customers as you can and convince them to buy from your company again and again. Achieving customer loyalty comes as a result of giving your clients a pleasurable positive experience that strikes an emotional cord and makes them feel satisfied over and over again. The key is consistency. If you can consistently achieve high customer loyalty numbers by measuring how much and how often your customers buy from you, you are on the right track. Many of the big box brands have loyalty programs to give their customers incentive to keep buying. Because these companies realize that nothing beats customer loyalty because it yields brand equity.


  1. Customer Acquisition Cost – The amount of money you spend to acquire a new customer is so important because you must know how much you need to spend in order to convince a customer to buy a product or service. Whether you sell something tangible (product) or intangible (service) you must be able to measure how much time and what specific actions are required to convert a person from a prospect to a paying client. How many actions and interactions does it take to close the deal? Write it down in a log or create a spreadsheet.


Another factor in customer acquisition is the churn rate which indicates the ratio of how you gain and lose customers. Your churn rate can have something to do with dissatisfied clients or perhaps a product or services that need to be tweaked or updated. Either way, you have to know not only what it takes to get a customer but what it takes to keep them. Knowing the costs it takes to get and keep your clients will help you to accurately forecast your sales.



  1. Monthly Profit and Loss – The profit and loss statement is another word for income statement. As a small business, it’s important that you track and measure your income from year to year. Not only to measure if you’re growing, but to understand where the holes are. If you don’t know where the holes in your business are, you will never be able to fill them. Your profit and loss statement also measures your expenses and helps you to track what you spend versus what you earn. Having a handle on such critical information will enable you to properly budget and forecast for future years.


  1. Operational Productivity – In order to maximize the productivity of your business, you need a productivity plan which addresses the process that covers a wide variety of activities relating to how well you conduct business. When considering your company’s productivity you must consider strategy, tactics and operations. What marketing and sales strategies do you implement on a daily, weekly and monthly basis? What tactics do you utilize to help you carry out your objectives and goals? What operational procedures do you follow in order to sustain company productivity? You must know the answers to these questions in order to have an effective productivity plan for your business.


  1. Inventory on hand – The amount of inventory you have to sell is another important factor in measuring your success. The fact is you can’t sell what you don’t have in stock or have not produced yet. That said, the inventory you have available will dictate your success as well as the time it takes you to produce the inventory. Many companies have elaborate inventory management systems that prevent them from shortages and running out of stock. As a small business owner, you must manage and measure the amount of inventory you have on hand whether it is a product, training book or simply the capacity to perform a specific service. Inventory control is important because it allows you to operate effective and efficiently.


  1. Overhead Expenses – This refers to the amount of total expenses you have to operate your business. Some people refer to overhead expense as standard operating expense. When considering your overhead costs, you must include the total expenditure of what it takes to operate your business. Measuring this expense cannot always be traced to a particular thing because it includes everything required to operate in your business. Some examples of overhead expenses would be: machines, computers, promotional materials, printed materials, advertising fees, accounting fee, event fees and gas/parking. It’s important to know your operating costs from year to year in order to know what type of profits you made.


  1. Gross Profit Margin – Your margin of profit is the tell tale factor in determining your success. Gross profit margin equals your gross profit divided by your net sales. An example of gross profit margin in percentages would be as follows.


  • Total sales $300
  • Cost of Sales $180
  • Total Gross Profit Margin: $120 which is 40% of $300


  1. Variable Cost Ratio – Variable costs are costs that change in proportion to the good or service that a business produces. Basically speaking this is an expense that changes in relation to how much activity your company has any given day, week or month. When you calculate variable costs, you must first understand fixed costs and the difference between the two. Fixed costs remain the same no matter what. For example if you rent a building or office space, that would be fixed costs because chances are the rent would be the same amount each month. Variable costs will change based on the amount of production. For example if you have an item that must be shipped to your customers each month that is a variable cost because based on the weight and shipping parameters the costs will vary. Also, the shipping cost and packaging cost will vary each month because the total amount of sales. With that said, I’ve given you two examples of fixed versus variable costs and both costs should be measured in your business because these costs cut into your profit.


  1. Input Hours By Process – This is the approximate number of logged hours it takes you or your employees who support the process of work each day to get the job done . Typically most people work a total of 8 hour days. Some companies have 3 shifts of workers each day to get the daily amount of work done needed. In your small business or company, you must understand and measure how many hours it takes you and your team to complete the work by the project or task at hand. Because you many have a limited staff, you may need to automate some of your work so that technology fills in the gaps. In addition, it may be important to delegate or outsource so that the work load is shortened and completed more effectively. It’s important to remember that operating effectively and efficiently should be your goal.  So if you need to secure additional support that is able to streamline the process for you, all the better.


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Lori A. Manns is an award-winning, marketing, sales coach and business strategist who works with small business owners to help them elevate their brand, get more clients and grow revenue. Lori A. Manns is CEO of Quality Media Consultant Group and founder of the Trailblazer Business Academy™ where advancing entrepreneurs go to learn breakthrough business strategies for productivity and prosperity the soulful way. Lori is also the creator of Sponsorship Sales Secrets System; ™ that shows you how to get more sponsors and sales for your business, guaranteed. To purchase consulting services on marketing, advertising or sales and, learn how to increase your revenue and grow your business; please visit the small business solutions page on