Tracking your metrics is a painstaking but important part of running a business. You can’t know how well you’re doing until you can define and measure your success. Or as Peter Drucker puts it, “If you can’t measure it, you can’t improve it.”.
It’s not enough to rely on gut feel. We all have an opinion on what works and what doesn’t work. But we can’t really know until we measure. Imagine what would happen if pharmacists developed medicine based on gut feel instead of experimental data.
With countless different business metrics to choose from, it can be a little overwhelming. In this blog post, we’ll focus on 3 key metrics to give you a taste of the power of using data analytics in your business.
Key Metrics to Measure
Now, I know what you’re thinking. This is the most obvious metric used to measure a business’s financial performance. You’re probably already measuring this. However, you shouldn’t just measure and analyse total revenue in isolation, but in context. You need to combine it with other metrics and ask questions such as:
- How has it changed over the months?
- How is it affected by factors, such as seasons, advertising campaigns and price changes?
- Which products contribute the most to the total revenue?
Finding the answers to these questions, and hence understanding your revenue, is the key to figuring out where best to focus your time and energy.
Days in Inventory
Days in inventory indicates your inventory management efficiency. Slow-moving stock is a pain for many small business owners. Storing inventory costs space, rent, and labour to maintain it. The slower your inventory moves, the longer you have to pay for these costs.
So, it’s important that you use your limited inventory space wisely. You need to measure the average number of days your inventory takes to sell, so you can look into meaningful ways to reduce it. Identifying which items take the longest to sell can help you figure out which items don’t sell or are overstocked. This is especially crucial for companies that sell perishables or seasonal items.
Customer Lifetime Value
Customer lifetime value is the projected total revenue a customer will contribute during their lifetime. The value of a customer is not just what they spend on one day, but how much they spend throughout their lifetime. So, customer lifetime value can give you an idea of how much you should invest in marketing campaigns to attract new customers.
It’s also an important metric for understanding how much your existing customers enjoy your products and how loyal they are. Not only is it cheaper to keep existing customers than to acquire new ones, but loyal customers may also act as brand ambassadors for your company. Hence, it’s well worth your time and money to spend on customer retention.
All of this sounds great, but many businesses struggle to measure these metrics fast enough to respond to them. It’s not good enough to measure them once a year when you’re filing your accounts. You need to know how these values change daily, so you can act fast and maximise your profits.
That’s why Konigle automates both the data ingestion and the calculation of these metrics for you, so you always have access to the vital information you need to grow. Having visibility on your business on a daily basis makes it easier for you to grow your business.