Maximise Performance By Tracking Your Trends

Tuesday 18 August, 2009

by Donna Stone

Operating a successful business involves tying a number of different strings together. Some say marketing is critical, or financial management, or closing the sale. These are all important - but to really maximise their performance, it's essential to track progress. Listed below are some critical, but simple, components to track and a method for doing so.

• Track your leads
  
  This one is simple. Have a list of categories from where your leads are generated. Some of your categories might be:
  
  
  • Client / Associates
    
  • Advertising
    
  • Networking
    
  • A specific marketing campaign
    
  • Website
    
  • Friends / Family
    
  Then absolutely every time someone new contacts you, ask them "how did you hear about us?". Write it down in a schedule. After a period of time, six months for example, sit down and work out your percentages.
  
  It might be that most of your leads are generated from your website and the least from advertising. If this is the case, then it makes sense to improve and maintain your website and cut down on the sources which don't work for you.
  
  Review the percentages regularly (at least every 3 - 6 months) so that you are always investing in the best source of lead generation. Just spending money on advertising and marketing doesn't necessarily mean you are spending wisely.
  
• Track your debtors
  
  If you are offering credit, do you know how quickly your clients / customers pay you? You should review your receivables listing each week, and also track how quickly you are paid. Track it month-by-month and try to reduce the number of days clients take to pay as you improve your debt collection process. Take your closing debtors / receivables and divide them by your monthly sales, then multiply by 30, or (Debtors / Monthly sales) x 30.
  
  For example: Bob's monthly sales are $200K and his closing debtors are $400K. Collection days are ($400,000/$200,000) x 30 = 60 days.
  
• Track your enquiry retention rate
  
  You should be tracking all your leads. Do you go back on each lead and note (say 2 months later) when you converted that lead to a sale / customer? This is fairly simple - just take your leads for that month (say it was 10) and note how many you successfully converted (say it was 7). Your conversion rate is therefore 7 divided by 10, multiplied by 100 = 70%.
  
• Track your enquiry conversion cost
  
  Do you know how much it costs you to get a new customer? We all know it costs more to get a new customer than keep an old one - but do you know the specific figure? Simply take your advertising cost for that particular month (it might be traditional advertising, cost of maintenance of your website, cost of attending networking functions, thank you gifts, mail outs, etc).  Say that cost is $1000 and you gain 2 clients that month. Then your cost is $500 per client. Having then worked that out, look at how you might retain a client once you gain them! A little bit of extra customer service may be wise to protect your investment.
  
• Track clients you know you've lost
  
  I know we do not like to focus on the negative, but use the loss of a client or customer in a positive way. I appreciate for some businesses this can be hard. You may never know that someone didn't come back.
  
  For those who are service-based, it might be a little easier, such as businesses which provide a regular service. If you do know you've lost someone, find out from them why they are leaving. In fact, by asking, you may even gain the opportunity to rectify, if in fact it's something within your control. But, if not, find out why the client is going and give careful thought to how you could have kept that client.
  
  Should your business change how they do things in order to stop losing more clients for this reason?  It's not about laying blame, but about analysing and improving, in order to make your business better. Also, take the opportunity to thank the client (in a letter) for their business and that they are most welcome to come back to you if the other option doesn't work. It might be that another business has poached them with offers of fantastic prices, but then cannot live up to their promises. If the ex-client felt you would welcome them back, that may be exactly what happens.
  
• Track your accounting
  
  Here are some other ratios to track, as part of your financials:
  
  
  • Percentage of debtors to sales
    
  • Percentage of gross profit to sales
    
  • Percentage of net profit to sales
    
  • Sales per employee
    
  • Percentage of gross wages + super to sales
    
  • Percentage of direct costs (cost of good sold (COGS)) to sales

Author Credits

Donna Stone is the founder of Stone Consulting, a Brisbane based MYOB Consultancy & Bookkeeping business which has been operating for 9 years. With 25 years experience, 12 staff, hundreds of clients and being a multi award winner, she has not only developed the skills to juggle all the balls but with great success. For further information you can visit http://www.stoneconsulting.com.au/.