As the new year fast approaches and we all get ready to take a well-deserved break over the Christmas and New Year period, this is an opportune time to think clearly about your business and consider which areas of your business you can improve upon in the coming year.
So while we have some time away from the day-to-day running of our businesses, I want to emphasise, yet again, just how important it is to understand and monitor all the numbers in your business.
It’s vital if you want to continue increasing your productivity and run a successful, results-oriented business.
So, if you don’t know and understand your numbers intimately before you make decisions, you have nothing to guide you. Your decisions will be based on guesses and emotion, not data and facts.
It doesn’t matter whether you are ‘good at this sort of thing’ or not. It must be done. It is non-negotiable.
If you have a financial background, you love spreadsheets and you know your way around a balance sheet, you might be able to handle this side of things yourself.
But if you have trouble counting past 14, don’t think that you are off the hook. Knowing your numbers is just as important for you too, but you’re going to need help. This can come in the form of somebody inside the business who can crunch the numbers for you, or somebody outside the business, such as an accountant or business strategist who understands your strategies and goals for your business.
If you want to be certain that all your decisions are strategic, rather than just being made on a hunch, you must know your numbers, and understand which numbers are most vital to your decision making.
Understanding your numbers in marketing
One of the key areas of business that many business owners fail to understand their numbers is marketing. Many businesses begin marketing simply because they ‘want to get out and do things’.
This can actually provide a brief illusion of success, because spending any money on marketing can result in more customers coming to your door. What it will not do is provide the right customers that are essential for long-term growth in productivity and profits.
So, let’s look at this from the perspective of marketing.
What are the most important questions to ask first? Are they:
- How many customers are you trying to acquire? No.
- How much profit are you trying to generate? No.
- What shiny new product are you trying to promote? No.
All your marketing options will develop from these questions:
- How many new customers do you need?
- What is your conversion rate?
- What is your cost per lead?
- What is the lifetime value of each customer?
- How can you improve the conversion rate and lifetime value, because those two aren’t expensive?
To develop a long-term, sustainable marketing plan you must start with these questions. It’s no good simply throwing money at marketing (or anything else). This may get short-term results but it will cause long-term problems in the business. This approach is neither outcome-based nor well-thought-out, and therefore is not sustainable.
With finances, you have to understand it comes down to first what and then how.
Management will always make decisions. These decisions lead to activities. These activities will lead to results. These results are needed to measure the success of anything you do in your business, and also for accounting and compliance reasons.
But, most importantly, these figures are needed for your day-to-day understanding of whether you are on track and how you are trending.
They need to be measured for business intelligence. You need the data to assess your previous decisions, and to inform your next decisions.
If you don’t know what’s actually showing up you have no basis on which to make or evaluate decisions.
So as we’re just about to enter a new year, you should be considering whether you need to have a better understanding of your numbers.
If you do need to improve in this area, consider how you are going to improve. As is the case with everything, you can’t just wish and hope without having a strategy.
So I hope this has got you thinking about how you can improve your strategic thinking in the new year.
As you think about your strategy going forward, I also encourage you to check out our podcast where I discuss the importance of identifying your ideal customer.
Knowing who you should be serving is the foundation of your business, and is vital to developing a strategy for long-term success.
Finally, on behalf of all the team at Business Benchmark Group, I hope you and your loved ones have a very merry Christmas, and a happy and prosperous new year in 2022!
Power to you!