Picking the metric that matters
Posted on May 6th, 2013
The hard part is in figuring out which aspects of your business aren’t worth your focus and attention, right now. Technology startups that prescribe to the lean startup methodology might tell you that they’re focussed solely on cpa, cost per acquisition (CPA) or the customer lifetime value (CLV), and the rest of the data can take a hike. This is a bold move and utterly critical for small businesses getting started and is not limited to businesses that describe their front of house with terms like ‘bounce rate’ and ‘click-throughs’. It can be applied to almost every form of small business, the smaller the better, and it can be the difference between hours of wasted time and success.
It’s called picking the metric that matters.
As a small business owner, you no doubt have a strategy in mind for growth. That strategy might be completely inarticulate (“let’s just keep doing what we’re doing, but better!”) or it might be more finely detailed (“we’ll pursue growth by adding to our line of products and opening a new branch in a new neighbourhood”), but it’s there. No matter if you’re looking to make more money, be more influential in your sphere, win more contracts or simply keep your creditors at bay, you’re looking to create new value. So why would you want to think about just one metric? Isn’t that crazy? Won’t you lose sight of the bigger picture?
The answer is both yes and no, but the more important question is how are you going to decide where to focus your efforts. Looking at one metric is a simple exercise in focus, a way of triaging the less important numbers. Focussing on too many interrelated metrics will leave you in confusion about what really happened and you still have to make a call on which is the most important. Instead of continuously changing your view, depending on how the data is playing out, just pick one and stick with it. Pick one that will genuinely change the way you do business, if it goes up or down. Pick one that might keep you awake at night. Pick the riskiest part of your small empire and focus on that alone. It could be how much it costs to win new business. It could be how high your overheads are. It could be the small revenue you earn per customer. Each business will have a different significant metric and different ways to measure it.
Your job is to identify it, observe it and to dream up experiments to test its limits.
Think of it like mould in a petri dish. How could you imagine that mould growing exponentially? What would it take to make that happen? What kind of environment would allow it to flourish, just like you’re imagining? How could you change your business to grow your metric like the mould in that petri dish? How might you change your approach?
Do everything you can to help it grow. Talk to your customers. Buy new ad space. Write more blog posts. Change the logo on that banner ad. Mention how you’re in the process of designing that cool new widget. Share your ideas, and watch how that metric changes. If something you try breaks the business, that’s ok. Remember you’re trying to break the small business in order to create that ‘petri dish’ rate of growth.
It takes guts to embrace this, but you won’t regret it. Find the metric that matters. Poke it and prod it. Find the best conditions for it to flourish, then get out of the way.