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Managing the Numbers

In the early, exciting stages of starting and running a business it’s often a case of head down and just doing stuff, marketing, selling, manufacturing, accounting etc. and you pretty much know where the business is because you are the one doing everything.

Monitoring Key Performance Indicators (KPI) seems pointless at this stage. However, often as the business grows this lack of information continues and management rely on “gut feeling” or a sense that “I started my business and I know how it works” to make decisions.
But perception and reality can be deceiving. What can seem rewarding and profitable can, when subjected to analysis, prove an expensive waste of time. For example a client who is fun to work with, who calls you regularly for advice and pleasant chats may appear to be your best client. When you track the hours spent against money received, often with late payments, your “best client” can rapidly drop to the bottom of the list!

The best time to develop systems for tracking the KPI is right at the very beginning, what is important in your business? Typical numbers on the sales and marketing side include Cost Per Lead, Cost per Sale, number of 1st and 2nd appointments, number of sales, value of sales, average sales value and Lifetime Value of a Client. Depending on your business you should be tracking some, all or variations on this theme on a regular basis.

I would even go so far as to argue that the more often and the more accurately you track these KPI the more successful your sales and marketing will be. For example, I used to take a stand at a high profile local exhibition. Each year we returned with a big pile of contacts, many who had expressed interest in our services. We always ended up making sales. Fantastic!

Of course we tracked the number of leads each year, monitored the source of appointments and always logged where sales came from. The exhibition was a huge success each year, generating leads, sales activity and new clients.

After a few years I did a closer examination of the cost of the stand, including the cost of manning the stand, the leads we collected and the number of sales we achieved. Then we looked at the Lifetime Value of the Clients we had obtained. This is where the reality and perception collided.

The Cost Per Lead and the Cost of Sale were higher than other marketing methods and the Lifetime Value of the Client from that particular exhibition was much lower than average. Not a bit lower, much lower. With the odd exception the quality was very poor. Suffice to say we have not exhibited there since.

So track all your KPI as soon as you start your business and track it in detail. You may not spot trends immediately but the fact you have that information means that eventually patterns will arise and decisions can be made on hard empirical evidence.

I have focused on sales and marketing in this article but does not mean it is not important to track KPI in other areas of the business, all areas should be under the microscope all the time. As the business grows this becomes the single most important factor in running a successful enterprise. So spend time to work out what your KPI are, track them religiously and watch your profits grow.

About The Author: Nigel Wilkinson is Managing Director at WNW Design and has recently launched a new business www.nican.co.uk . In addition to his business interests, Nigel is married to Yoga Dance teacher Michelle, the father of teenage twins, Chairman of Exmouth Chamber of Commerce, an avid Networker, a Social Media commentator, a keen golfer and football supporter. You can follow him on Twitter @nigelwnw, or telephone on 01395 542569. You can also find WNW Design on Facebook here.