By Jonathan Kettle, Founder, Taxicode.com
Recently, what with increased media coverage on huge, multi-million pound businesses and entrepreneurs, it would be easy to think that a business is only successful if it secures investment or praise from a reputable Dragon. According to research conducted by the FSB, there were an estimated 4.9 million businesses in the UK in 2013, employing 24.3 million people and with a combined turnover of £3,300 billion. It’s fairly likely that a large proportion of these businesses didn’t fall into the category of ‘externally funded’, yet are still a roaring success. This poses a very interesting question – how do you really measure business success?
For many small business owners (myself included), it can be fairly daunting operating in a marketplace where your competitors ‘seem’ to be bigger, more established and more successful than your own brand. Regular press coverage (though not necessarily positive) and an army of investors ready to fund any new business move. However, just because your business doesn’t have as much brand awareness and exposure as the big boys, does not mean it’s not yet a success.
There are many business owners who have self-funded their own venture without relying on external investment, and while it can be a slower climb, many find that this can be a bonus, enabling you to put greater focus on building a steady and sustainable business that doesn’t run away with itself before you have had time to iron out any of the inevitable issues that come with learning how to manage a growing business operation.
When it comes to measuring the success of a business, there are a few important factors outside of financials to be considered. Yes, a business must always be profitable and there is no point throwing money down the drain if you have a business model that is fundamentally flawed or unsustainable. This however, is more about looking at the wider picture of what ‘success’ and ‘value’ actually means.
For online businesses, analysing network traffic is one of the simplest yet effective ways of measuring success. Not only are you able to view the numbers of visitors you have received on your site, but also understand just who is visiting your site, providing valuable indicators of how successful you are at attracting your target people to the site. While it’s inevitable that visitor numbers will vary from site to site, you shouldn’t get caught up in the large figures that your competitors might be receiving compared to your smaller visitor numbers. At the end of the day it’s all relative, and doesn’t mean you’re any less successful. Visitor numbers should be kept track of, allowing you to see easily how your numbers have increased.
Repeat business can also be an important factor of success for many businesses, as this will be an easy way to see if you are providing a service your customers value or not. Even for small operations, a large number of returning customers can prove that you have the foundations to scale up your business. On the other hand, new enquires can also be an indicator of success, especially if these have come from referrals. If lots of new customers are interested in your business, it can only be a good sign. The challenge is always to ensure that you have a good conversion rate from enquiries to actual business.
Another success indicator lies in your average job value, including your product value, hourly rate, and so on. Your main competition might receive more customers than you, but if your unit price is higher and you are successfully doing business at those levels, you know that you have succeeded in showing the market why your service is worth the additional money. Having a smaller businesses with a higher job value holds the potential to become a bigger business with a higher job value. It is much harder to be a busier, larger business and suddenly up your prices!
Finally, it is always important to consider sector dominance – as long as you’re a big fish, it might not matter how big the pond is. Niche products and services often have the ability to expand into new markets, so there is always potential to grow in a big market, but leading the way in a smaller market is just as commendable.