You will find many keys to success when owning a small business. A small business owner must track specific metrics to lead their company to success. That is why we are revealing our list of the 15 most vital small business performance metrics for you to track.
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Sales and Marketing Business Metrics
Sales are the lifeblood of a small business. To generate profit, you must have the ability to sell your products or services successfully.
One of the ways to boost your sales is to invest in marketing for your business. Marketing is a competitive industry, and you must be attentive to specific metrics to help you succeed.
Here are some sales metrics that you can track to improve your small business success.
01. Sales Revenue
Obviously, if your company is not bringing in revenue, you cannot expect to survive. Therefore, revenue is perhaps the most important metric for a small business to track.
Sales revenue is the accumulation of money you make from customer transactions. Your small company should track its revenue in weekly, monthly, quarterly, and yearly increments.
02. Net Profit
To calculate net profit, you can subtract your company’s total expenses from its total revenue. It is common for most small businesses to have a negative net for their first few years of existence.
Other terms for net profit include net income, net earnings, or your bottom line. Your net profit number will determine whether your business is successful or not.
Your business accumulates many expenses each year, such as operating, payroll, and tax expenses. The goal of your business is to maximize your sales revenue and keep your net costs as low as possible.
03. Sales Growth Rate
It is always wise to track the sales growth rate of your small business in Canada. Sales growth rate means the rate at which your sales increase each month or year.
This metric is easy to track, as every business should know how much they make in sales each year. If your business’ yearly sales number decreases, you must make business operation adjustments.
Anytime you change your business strategy, make sure that you track your sales growth rate to assess the efficacy of your changes.
04. Average Leads per Month
Your small business must consistently generate many leads per month. Leads are potential customers who could help grow your business. Lead generation should be a critical component of your digital marketing strategy.
Someone on your team should be responsible for tracking the average amount of leads you generate monthly. The more prospects you have, the better your chance of increasing your net profit.
05. Lead Conversion Rate
Similarly, you can track the percentage of leads who turn into paying customers. Many small businesses can generate thousands of prospects. However, if they cannot convert them to sales, there is something wrong with the sales strategy.
It takes time to cultivate a successful conversion strategy. However, once you find a method that works for your business, you can start converting more leads and grow your business.
06. Recurring Revenue
If your small business runs on a subscription model, you must account for the recurring revenue you expect each year. For example, streaming companies like Netflix always know how many subscribers they have in each country. This figure lets them know how much revenue they can expect going into each year.
Subscription models have many advantages. The principal benefit is that it is easy to track your company’s growth. You can also determine how much it costs to acquire each customer by calculating recurring revenue.
Customer Service Metrics
Another vital aspect of a small business is customer service. You want your customers to trust your company and keep coming back. If you neglect your loyal customers, they will have no issue taking their business elsewhere.
As a business owner, you should always put the customer first. It does not matter if your product or service is top-notch if you mistreat your customers.
Here are some key metrics that will help you gauge the customer service success of your small business.
07. Customer Lifetime Value
Some of the most critical metrics you must track relate to the buying behaviour of your customers. Predictive analytics grows in popularity each year as data analysis tools become more accurate.
08. Customer Retention Rate
The most successful small businesses emphasize the importance of customer retention. Repeat business is crucial for a small business. This statement is definitive if you rely on local sales.
For example, if you operate an HVAC company in Vaughan, ON, you have a limited number of potential customers due to the nature of your business. That is why you must rely on repeat business to stimulate your net profit.
09. Customer Satisfaction
Another crucial thing you must keep track of as a small business owner is your customer satisfaction rate. If your customers are unhappy with your service, you will have a slim chance of retaining them.
One of the ways you can track customer satisfaction is with a survey. You can send surveys to your customers after they purchase your product or use your service to gauge their feelings. This method will help you learn what your business is doing right and what needs improvement.
10. On-Time Delivery Rates
If your small business ships products across the country, you must ensure that your packages arrive on time. If people are paying extra for your shipping services, they will expect their order to show up at their door promptly.
If you find that your packages are not getting to your customers on time, that tells you that your warehouse staff must perform better and increase their efficiency. Someone on your team should be responsible for following up on orders to see when they arrive at your customer’s residence.
11. Customer Acquisition Cost
When you implement a marketing or advertising strategy, you must have a monetary figure in mind that you are willing to spend. Many social media platforms like Facebook and YouTube will estimate how well your ad will perform at each budget level. The more you spend, the more customers will see your ad.
You should calculate the average amount it costs you to acquire a paying customer. This figure will help you identify weak spots in your marketing strategies and determine if your paid ads are working. Typically, businesses calculate this number each quarter.
12. Shipping Accuracy
Not only do you need your delivery rates to be on time, but you must also ensure that your packages ship to the correct person. If you make shipping label mistakes, your customers will lose trust in your business and never order from you again.
Also, when you give your customers an estimated arrival time, you must make sure that you meet that deadline. A lot of small businesses guarantee 2-day delivery on packages.
When you fulfil orders correctly, people will be keener to provide repeat business.
Operational expenses are the root of many financial problems for small businesses. While most small businesses focus on shaving down marketing and delivery costs, institutional expenses are more critical to supervise.
Here are some of the operational small business performance metrics to track.
One of the trickiest parts of operating a small business is figuring out your company’s payroll. You must make sure that you are not overpaying your employees for their contributions.
While every business manager wants to reward their employees as much as possible, the more you pay your employees, the more sales you must generate to profit.
Many automated payroll software systems can track operating expenses. Typically, businesses will hire a full-time accountant to keep track of payroll and office expenses throughout the year.
14. Overtime Cost
One of the principal components of being a successful small business manager is keeping on schedule. If you force your employees to work overtime frequently, it will cost you money and lower the morale of your employees.
Your business must find ways to accomplish tasks quickly and efficiently. The more efficient you are, the more money you will conserve. Therefore, you will increase your profits.
15. Vehicle Utilization
If your small business owns delivery vehicles, it is wise to track how often you use them and how much money you spend on each car, truck, or van. Most small business owners track these metrics manually.
However, we recommend using a software application such as OptimoRoute. OptimoRoute plans and optimizes routes for your company’s vehicles and tracks metrics such as drive time, mileage, and on-time delivery rates. Its mobile app will allow your drivers to see how efficient they are while on the road.
Frequently Asked Questions
We understand that you may have more questions about tracking small business performance metrics. Here are some of the most frequent questions people ask about growing their business.
Many small business owners worry about whether their business is growing the right amount. Truthfully, every business is different—plus, each industry has its own average growth rate.
Industry metrics show that you can expect your small business to grow by 15 to 25 per cent each year. However, it is common for startups to lose money during their first couple of years.
Also, you do not want to grow too much during your first few years of managing a company. Excessive growth can be overwhelming for a fledgling company.
Your business should aim to grow at a comfortable pace for yourself and your employees.
Most Canadian companies classify themselves as small businesses. Small businesses account for over 99% of the workforce.
The one threat for the future of small businesses is if multi-billion dollar companies such as Amazon and Google buy up the majority of small businesses. However, your business should not worry about that happening, as many people rely on small businesses to survive.
No “one size fits all” rule applies to profit margins for small businesses. Typically, experts consider a 5% profit margin low.
Your company should aim for a profit margin of 10% to find success. If you want a sizable goal to reach, you can set your target profit margin at 20%.
Your company should determine your profit margin according to your business’s industry. For example, a retail or grocery business will always be low-margin due to its sizable amounts of inventory. Conversely, software businesses have high-profit margins because they do not require a lot of overhead costs.
Here are a few average profit margins for different industries.
- Advertising: 3.3%
- Investment Banking: 17.62%
- Engineering: 1%
- Information Services: 19.13%
- Retail: 2.4%
If your profit margin is lower than you want it to be, here are a few things that you can do to get it on the right track.
Reduce Operating Expenses
Firstly, you should reduce as many operating costs as possible. Operating expenses include office space, utilities, equipment repairs, and much more.
If you have too many office expenses, you will have to produce more sales to profit. Similarly, when looking for commercial office space to rent, make sure that it is affordable. Paying high rent on an office building is an easy way to find yourself in debt.
Eliminate Underperforming Products and Services
A small business owner needs to track the success of each product or service they sell to consumers. One of the most notorious ways business owners lose money is by selling products that are not worth it.
If you spend thousands of dollars marketing a low-sales product, it is a waste of time and money. Your small business should consider investing in a break-even analysis that will inform you which products or services produce a profit for your business.
Adjust Your Pricing Strategy
As a small business owner, you must develop a sound pricing strategy to ensure that you sell your products and services at a fair price. These strategies require a lot of research into industry price averages, location, demographics, and more.
One reason why your products may not sell well is that consumers believe they are overpriced. It shocks many small business owners how changing their prices increases a customer’s willingness to buy their products. You may find increased website traffic for your brand.
As you see above, repeat business is a principal component to establishing a successful small business. Many grocery and retail brands offer rewards cards or credit cards that incentivize customers to return to their stores frequently.
This method is just one of many that you can implement in your business to keep customers coming back. When you have loyal customers, it helps cut down your advertising costs.
How Investing in CRM for Small Business Helps in Growth
Looking for ways to grow your small business? Learn about the benefits of investing in CRM in this article.
At Group Enroll, we match your business’s needs with the best group health insurance companies in Canada. In addition to health care packages, we provide quotes for group dental insurance, group disability insurance, group life insurance, and others.
The process starts when you fill out our quote form. This form gives us the specifics of your business, such as its size and number of employees.
Then, one of our top-notch customer service reps will call you to discuss your insurance needs in more detail. You can expect this brief call to last less than ten minutes.
After we know the ins and outs of your requirements, we will contact between five and ten different group insurance providers and receive quotes from each within a few business days.
Finally, we will email you the most competitive proposal out of the bunch. And that is all there is to it!
Get Quotes From Group Health Insurance Providers
Group Enroll is Canada’s leading supplier of group benefits package quotes for small businesses. We can connect you with the top group insurance companies in the country after you fill out our quote form.
Some of the group insurance companies we work with include Sun Life, Manulife, and other top brands.
If you have any questions or concerns about setting your business up with a group insurance policy, email us at firstname.lastname@example.org. You may also visit us at 10 Great Gulf Drive, Unit 5, Vaughan, ON, L4K 5W1.