Managing Your Business
How to Define, and Measure, Success for Your Small Business
Richard Branson made his first significant profit as an entrepreneur at 23-years-old. Today, the Virgin Group founder has a mind-blowing net worth of an estimated $5.1 billion. Despite that massive profit, you'd probably be surprised to learn that wealth has nothing to do with how Branson defines success as a business owner.
"It's a common misconception that money is every entrepreneur's metric for success," Branson wrote on LinkedIn. "It's not, and nor should it be."
While every business is different, they all share one common goal — success. But what exactly does success mean? Does it need to be tied to money? Is it based on how happy your customers are? Is it based on how happy you are? Or is a handful of other things, like new product development, employee retention, and community impact? Is it something more intangible like an attitude or state of mind?
The truth is, success can be all of these things or even just one of them. What matters most is how you choose to define it. Because without your definition of success, it's impossible to know how to reach it.
As you start planning your business strategy for the new year, here are a few tips on defining what success as an entrepreneur looks like. While some are quantitative and others are qualitative, they're all important indicators of your business' performance and progress.
Strive For a Five-Star Customer Service Experience
What's the first thing you do when you're researching a new-to-you business? Chances are, you head to Yelp or Google to read customer reviews. There's also a good chance that those reviews, good and bad, play a significant role in your decision to check a business out.
Long story short, positive experiences play a huge role in turning prospective customers into loyal customers. That's why, when setting key indicators for success, striving for a five-star customer service experience should almost always be a top priority.
A good first step to achieving this goal is to take an honest look at your current customer service. Start by scouring your Yelp and Google reviews. Are there any common threads in the less-than-five-star reviews? What are some of the trends amongst people who love your business? This is all authentic feedback to inform what to keep doing and where to improve when it comes to customer service.
Are your online reviews few and far between? No worries! Consider using your existing customer list to send out a quick customer satisfaction survey. You can ask them about their shopping experience or even if they're likely to recommend your store to a friend.
As you start to glean more customer insights, you may need to make some changes to bump that three-star average up to a solid five-star. Here are a few suggestions to do just that:
Don't fear complaints; deal with them
No one likes reading a bad review, and for many, it's easier to say, "You can't please everyone." The truth is, you probably can't make every customer happy all of the time, but if you give the complaint your attention, you have an excellent opportunity to win them back.
If you face a bad review on Yelp, address it. Own up to whatever mistake you made, and offer to make it right. This can be as simple as offering a discount the next time they drop by your store.
Let your customers know you're eager to help
Maybe you've put a customer on hold for too long. Or maybe you've been too busy to answer the phone, and it went to voicemail. Whatever the case is, you may have already lost a customer.
A good way to show you care about your customer is to always answer your phone. Get call forwarding to your cell if you can't physically be at your business location. It may even be time to consider hiring staff to handle incoming calls.
Throw in a little something extra
Whether it's 15% off the next purchase or a free product sample, people are always thrilled to get more than they thought they were getting. It's a small gesture, but it shows your customer that you appreciate their time.
Increase Your Brand Awareness
Boosting your brand awareness is often a catalyst for boosting other success metrics, like increasing sales or even getting more customers. That's why this is one indicator of success that can drive growth for your small business.
So, where do you start? Your website is often the first stop for any prospective customer. This means driving more traffic to your website is a major factor in boosting your brand awareness. Here are a few steps to take:
Build engaging content
Start by building resonant and engaging content to make your website a resource, not just a sales platform. Consider creating short how-to blogs that are relevant to your product or even rounding up lists of your favorite things. The point is, these blogs can be entertaining and useful, not sales-y.
The goal here is to acknowledge a challenge your audience is experiencing and present a solution (which, of course, your own product offers). This builds credibility and helps position your business as a thought-leader in your space.
Use your content on social
Once you have relevant content ready to share on your website, the key to boosting brand awareness is getting more eyeballs on it.
Drive clicks via your social media channels by posting this new content and encouraging followers to learn more by clicking through to your website. Even if they don't click, it's not a loss. You got your content in front of new audiences, and every new follower, share, like, or comment is a win. All of these metrics are important for tracking the progress of your brand awareness.
Drive direct traffic by purchasing paid ads
Using a tool like Google Ads, you can create targeted ads with the right, relevant content. This means you can place your content in front of the right people, in the right place, and at the right time. Google Ads lets you place ads either in search engines like Google Search or on non-search websites, videos, and more.
Of course, this isn't the only way to boost brand awareness. You can also consider creating email marketing campaigns to spotlight new products and deals as you gather emails for prospects. A higher open rate and higher click-through-rate mean you're on track to meeting your goals.
Audit the Financial Health of Your Business
Your financial health is different from how much money you're bringing in. Here, it's essential to understand how you're doing and, if you stay on the current trajectory, where you're going, whether it's good or bad. This will give you a clear roadmap on what to keep doing and what to fix to make a profit a year, two years, or even five years from now.
Here are a few vitals to monitor when auditing your business' financial health:
How much are you spending on inventory?
It's unavoidable — making money requires spending a bit of money upfront. When you assess your cost of goods sold (COGS), you can see just how much money you need to spend to make a profit. This number may not mean much on its own, but when combined with other key business metrics in your financial audit, it can help you:
- Lock in the perfect pricing structure
- Get a clearer picture of your business' overall financial health
- Understand how profitable your products are and which ones aren't pulling their weight
Calculating your COGS comes down to this formula: Beginning Inventory + Inventory Purchases – Ending Inventory = COGS.
How much are you making on your sales?
How much money are you bringing in every time you sell a product? To figure this number out, you need to calculate your gross margin by looking at your income statements. Your gross margin shows the amount of revenue you brought in before factoring in other expenses.
You can calculate this number with the following equation: Gross Margin Percentage = (Revenue – COGS) / Revenue.
This number will show you how much money you keep after the cost of goods sold. If your gross margin is decreasing, your business might not be doing too well. In this case, you might want to make up for those losses by making cuts elsewhere.
How much money do you have leftover, and how much do you owe?
If you're like most small businesses, chances are you have some debt lurking here and there. That's why you'll want to look at your debt-to-total-assets ratio when checking on your financial health to see just how much debt is under your name. You can calculate this with the following equation: Debt to Total Assets Ratio = Value of Debt / Value of Assets.
Here, you're looking for a lower number as an indicator of good financial health.
Create a Better Work-Life Balance
Not all goals need to be measured by numbers.
When you started your small business, it undoubtedly came with a few headaches. You said goodbye to a regular, steady paycheck. You may have sacrificed time with your family as you worked hard to ramp things up. Maybe you even sacrificed your own health, ditching sleep and exercise in exchange for long hours.
All of these things and more can take a toll on your physical and mental health. And when you aren't at your best, your business probably isn't either. To ensure your small business doesn't fall behind, consider setting some personal goals that help to keep your well-being in check.
So what does success look like in this case? It starts with finding balance.
Set aside time every week for your family — no work, no emails, and no phones. Don't forget to focus on yourself, too. Find time for a run or an workout at the gym. Dedicate an hour to reading a book. Or even give yourself time to take classes and learn something new.
Most importantly, don't forget to completely step away from your office every once in a while. Take a vacation, even if it means closing the doors for a couple of days. Seriously, you've earned it.
The Bottom Line
Every business owner looks at success differently. You don't need to be the next Elon Musk or Jeff Bezos. If you like what you do and enjoy being your own boss, just paying the bills could be enough. We've heard many stories from small business owners who chased their entrepreneurial dreams and never looked back. None of them are billionaires (yet), but they're all showing us what success looks like.
How you define success may be different for every small business, but there is one constant — there's always a pile of paperwork getting in your way as you start ramping things up. Avoid the hassle of formally establishing your business and let Swyft Filings' team of experienced business professionals help establish your LLC so you can focus on crushing your goals and realizing success.