You Get What You Measure :: What Metrics Should An Indie Business Track?

If you are an existing indie business owner, your business is the vehicle to a more fulfilling and purposeful life where you are building value for yourself, your customers and employees.

But as the driver of the vehicle, how do know you are headed in the right direction or whether you will run out of gas before you reach your destination?
How do you know you are creating value in your business or will have the resources available to achieve your goals?  
In short, what do the metrics in the dashboard look like that will help you navigate your business.

Speaking of metrics and dashboards reminds me of a line from my  big business consulting  days “You get what you measure”. What that means is when you choose to measure something you predetermine what is going to be important to you.

For examples,  schools measure test score and therefore students learn how to take test and not how to think and be creative. For businesses that value stock price over everything else, all decisions are based on improving that one metric and as a result they make decisions  that are shortsighted and may be detrimental to the growth of the company in the long term. On the other hand businesses that are obsessively focused on building great products and focus on customer & employee satisfaction get huge uptick in the stock price.

In other words, you need to cast a wide net before you determine what you want to measure for your business.

The equation for every business looks like this:

Leverage Assets (products + know how + customers + cash )

To

Produce Income

Minus

Overheads ( to run the business)

Equals

Profits ( to spend or buy more assets)

Most indie businesses need to understand that just because you are focused on income generation, it does not mean everything else will work itself out and that somehow you will be making a profit or building a sustainable business.  Nothing could be farther from the truth.

You need a more holistic view of your business.

What should you measure and track? Instead of re-inventing the wheel, lets borrow some universal ideas that has been working and proven for big businesses and tailor it.

Successful businesses measure and track key metrics along these dimensions:

1. Product : This relates to product  innovativeness; how  well you identify unmet needs of the customers, identify & create sample products or services and finally launch products to target markets.   
Potential metrics to track: percentage of revenue from new products, product development cost as percentage of revenue, revenue mix by product line.

2. Customers:  This relates to how the customer perceives your brand and are you delivering as per your brand promise. 
Potential metrics to track - customer satisfaction index,  percentage of customers who complain , percentage of revenue from repeat customers ,  returns as a percentage of revenue.

3. Systems & Process:  This relates to internal systems, processes & employees you have in place to market, sell or distribute your products and services to customers and how well they are performing.

Potential metrics to track - percentage of orders not delivered on time, percentage of returns due to product quality, percentage of tickets closed with the first call, employee turnover, employee satisfaction index, employee morale.

4. Financials:  This is the final outcome of how well you address your customer needs and how effectively you run your business.

Potential metrics to track –  percentage growth in revenues, cost to acquire customers, cost of goods (COGS) sold, sales & marketing as a percentage of revenue, margins by product line.

I don’t want to be prescriptive here and tell you what you should be tracking.  This is more of a framework to jumpstart your thinking about what you want to measure and therefore to track for your indie business.

To get started, ask yourself the question, what is important to you?

The answer may be happy customers, best in a product category, increase profits etc. Once you determine the end goal, you will be able to figure out the path to get there. REMEMBER to identify the signposts (key metrics) to track along the way to ensure you are headed in the right direction.

What do you measure? What does that say about what you value? Share with us, in the comments!

Image:  All rights reserved by Ryan Katsanes Photography

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