Some might argue that it’s OK to grow a business without the number one rule in business which is measuring success and profitability first before scaling and growing your small business. “Digital Dave” in this episodes discusses why having metrics and focusing on processes and profits first is critical to small business success.
Hello, everyone. It’s Digital Dave back for another episode of where marketing meets technology. Today, we’re going to talk about something that I really, really, really enjoy, and that is charts, figures, graphs and numbers.
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We’re going to be discussing what I consider to be the most important, number one rule in growing your business, and that is, it’s all about the metrics, processes and profits.
Now, a lot of people might argue this, that growing a business, sometimes it’s more important or they feel it’s more important to grow your brand first, and let the business follow, which is … it’s their opinion. But my feeling on this is that your business is really all about your ability to measure success, your metrics and your processes that lead to profits. I’m going to share with you some reasons why and some examples from our past of why I feel so strongly that that is true.
Let’s, first off, talk about a little bit about really the key to the success of growing a business and that is metrics and process and, of course, profits is on top of that. First thing we’re going to do is we’re going to look at a tool that we use to help our clients, and this is one of our clients here, measure their metrics. This is mostly digital marketing metrics for them that gives them and us a snapshot of really what’s really going on in their business, without having to look in a lot of different places to find it.
Don’t judge each day by the harvest you reap but by the seeds that you plant.
Robert Louis Stevenson
This tool is called Cyfe, C-Y-F-E, cyfe.com, and then, you could certainly go get this yourself and subscribe. There are other ones out there. I found this one is pretty easy to use. Really what it does is it lets you create some pretty quick-and-easy dashboards that enable you to connect to different sources to get information regarding your digital marketing. As well as you can connect to some custom sources where, in this case, for this client, we connected to a Google document, which is tracking some of their sales.
I’m going to go through some of these metrics here and kind of give you the ins and out of what this means to this particular business and really why it’s so critical that you have some way to measure and quantify your business. Now this is, again, really more for digital marketing, although it can track some outside marketing as well, if you connect it to some type of a spreadsheet where you’re tracking stuff.
This first graph here is really a year-over-year sales graph, which shows the customer’s revenues 2016, ’17, and now going into ’18, month by month, in two different product lines, and what they did in Year 1 versus Year 2 versus Year 3. Of course, this is really important to know, number one, some seasonality in these products. You can see some seasonality probably, and you can see what are your results. Was 2017 greater than 2016? Or was 2016 greater than 2017 and why? I think that’s important to know because if it wasn’t an anomaly, then you need to fix whatever caused this on a year-over-year basis if the numbers were significantly different.
Below that, we can see some clear trends in their Google Analytics. This is their website and you can clearly see that there are some great positive trends going on there right now. Here’s some AdWords campaigns that have been running, and you can see the cost of these campaigns and the number of conversions and clicks and successes. They’re to measure how well those ads are doing. Are you getting a ROI on your ads and, if so, what does 13 conversions mean to that business and revenue versus what you’re paying for it (for this business this is a big ticket sale so 13 conversions is a very good number)?
You can also see if there’s problems. This is one of the things that we use these metrics a lot for, is that I might come in here, and then, all of a sudden, this thing is flat-lined. You might find out that it’s because Google changed something and now, all of a sudden, one of the ads that was running was disapproved. Well, if you’re not looking at that in your AdWords account, you might miss that for weeks at a time. Then, all of a sudden, you’re like, “Well, geez. Where is my business?” So this kind of gives us a quick snapshot of not just success, but also health of some of the digital marketing campaigns that are going on.
You could see down below some more AdWord campaigns around retargeting and what that looks like as far as the cost and conversions. Some Facebook page returns recently. This is something that, here, I’m kind of seeing a little bit of a downtrend. Maybe we’re not focusing enough on Facebook here at this point in time for this client, or we’re not running campaigns for them on Facebook maybe because of seasonality.
Here is a email campaign. You can see this is a recent email campaign that went out and what it looks like as far as returns on the emails that were sent. You have to know what the campaign was, obviously, to kind of gauge it. Not everyone is going to be the same.
Here’s some information regarding the rankings of the site and their back-linking efforts, what this looks like. Then, obviously, this is some information on this client’s Twitter account as far as trends. Again, you’re going to see ups, you’re going to see downs, you’re going to see times where there’s red and times where there’s green. The idea is that you want to be using this to really quantify what is going on in your marketing efforts.
Now, this is only one piece of the overall pie, is being able to measure something like marketing. Another piece of this is your actual profits and the systems and processes that you put in place to take this money here and to turn that into some type of a profit.
We think it’s really critical that if you’re focusing on your metrics, that’s crucial to making sure that you’re being efficient in those areas. If you’re also focusing on making a profit, what that tells the world is that not only is your business running well, but it’s actually netting money in.
I watch a lot of Shark Tank. One thing I can say that I’ve seen on Shark Tank as an ongoing trend is when somebody comes up there in front of the sharks and they have a business that’s already generating positive cash flow and profits, their eyes almost instantly light up. This is really critical, I think, because of two reasons as a whole. One is it shows that you’ve priced your product well enough and you managed your business, your processes and measure your metrics well enough that you can make a profit. Two: I think that this is really very critical to do this as early on in your business as you can before you ramp up your sales to a degree where it’s almost out of control.
I’m going to give you some examples that Small Biz Stacey and myself went through personally as in two of our previous businesses. We could tell you, we’ll both say the same thing. We flat out … grew the businesses too fast. We literally got customers in the door faster than we could manufacture them efficiently. Faster than we could put the processes in place to make the business efficient to be profitable before we were ready, essentially, which led to cash flow issues in a couple of those cases.
I think it’s critical that early on in your business that you learn how to make a profit out of whatever you’re doing before you decide to scale your business to some large degree because it’s a good habit. It teaches you how to make sure and identify what it’s like to have a profitable business and what it’s like to then not see any profits after that. You’ll be able to identify the issues much quicker if you’ve already turned a profit in your business and you understand how to do that.
These key rules, I think, if we’re growing a business in an efficient matter are always a bit debatable because there’s the bootstrapping method, which means you’re financing it yourself and then there’s the branding method, which means you’re building a brand and you may be borrowing money to grow your brand before you’re really concerned (about profits) where you really want to ramp it up and get out there as fast as you can before you put all these processes in place.
Well, I’m a big fan of the first, which is profit first. You need to learn how to train yourself as a small business owner to make a profit out of your business. Then, when you do, and you manage your metrics it’s really easy to see things are broken, when they’re not working the way that they should (fix them quickly).
I hope you get something out of this episode. This is where marketing meets technology. This is Digital Dave, and we look forward to catching you on the next episode. Thank you.
Stacey Riska, aka "Small Business Stacey" is a serial entrepreneur who is passionate about saving small - and not so small - businesses one marketing plan at a time. She helps business owners become a #SmallBizMarketingWiz by teaching them marketing strategies that get MORE: MORE leads, MORE customers/clients/patients, MORE sales, and MORE profit. Stacey's in-demand "Small Biz Marketing Success Coaching and Mastermind Program" is transforming the businesses - and lives - of those who want wealth, freedom, and market domination. Her highly acclaimed book "Small Business Marketing Made EZ" lays out the 6-simple-step plan to get your marketing into ACTION - literally and figuratively. Stacey is also the creator of Cups To Gallons, the place where independent coffee, smoothie, juice bar, ice cream, dessert and snack shop owners go to learn how get into lucrative catering so they stop selling by the cup and start selling by the gallon. In this program she teaches from experience, as it was the key strategy that transformed her coffee and smoothie business from being $500K in debt to a 7-figure profitable business. When not saving the small business world, she enjoys sipping red wine, eating chocolate (who doesn't!) and spending time with her amazing husband.
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