In today’s digital world, big data metrics have allowed small business owners to better understand analytics and become more acquainted with their customers than ever before. The more detailed their metrics, the better small businesses can identify strategic insights that can help their businesses soar.
Once you have a sales history, you can of course determine inventory turnover, lifetime value, and other traditional business measures. You can also take advantage of online and social media statistics which have become increasingly important when developing products, services, and a loyal consumer base.
However, there are three mission-centered metrics that small businesses often ignore because they are generally harder to assess. Consider these essential metrics to improve your bottom line and build long-term growth.
1. Analyze Employee Satisfaction
A happy employee base is the foundation of a healthy business. In small businesses, it's especially important to analyze and engage employee satisfaction. According to the Harvard Business Review, a satisfied employee is more effective at work. In fact, HBR reports that studies from the Gallup Organization and the Queens School of Business found that unhappy or disengaged workers showcase 37% higher absenteeism, 49% increase for more accidents, and 60% higher chances for errors on the job. They also experience 18% lower productivity rates.
Employee satisfaction metrics can be combed via internal surveys and other informal meetings. But small businesses can also calculate the cost of employee turnover. The resources it takes to hire a new employee can greatly burden small enterprises. The American Psychological Association reports that more than $500 billion is lost from the U.S. economy due to workplace stress. At high-pressure businesses, health care costs are 50% higher, creating a workplace of stress, disarray, lost work days, and ultimately less time for creative endeavors or productivity.
It’s essential, and easier, for small businesses to focus on their employee satisfaction with less personnel. Frequent group and individual meetings can help you determine employee sentiments and necessary improvements to keep the workforce happy and innovative. In addition, employee perks like work-from-home days, team building, mentoring, and flexibility go a long way. Recruitment, hiring, and training are costs that should always be readily available and factored into the budget to save time and money.
2. Determine your Cash Conversion Cycle (CCC)
Every business needs a cash conversion cycle to measure liquidity, management, and its overall health over consecutive periods. Small businesses are no exception. According to Investopedia, calculating your business CCC is essential to help you determine how fast your company can convert cash on hand into accounts payable and inventory — like sales and accounts receivable — and then finally back into cash. The measurement helps determine management’s capability to use short-term resources and liabilities to create more cash for the company.
Four factors can help small business owners determine their CCC. They include:
- The timeframe it takes for customers to pay their bill
- The amount of days it takes for your business to complete its product or service
- The time it takes for a product or service to sit in inventory before sold
- The time that small businesses have to pay back their vendors
In addition, small business owners can use three basic steps to calculate their CCC. First, take the average number of days you hold inventory. Second, add how many days it takes your customers to pay you. Next, subtract the number of days it takes for you to pay your suppliers. A desirable result will be a lower number, indicating a large amount of free money as customers will pay your business well before you pay your suppliers. Keeping your CCC as a single digit is your main goal. Small businesses should focus on just-in-time inventory solutions, quick and digital payment processes, and lenient terms with suppliers.
3. Troubleshoot Cybersecurity Knowledge
As digitized infrastructures become a foundation of our business — and world — small businesses are at increased risks of cyber attacks. According to the Verizon Data Breach Investigation Report, 61% of breaches hit small businesses in 2017 alone. Often, small business owners don’t realize when they’re under attack. The 2017 Nationwide’s Business Owner Attitudes & Usage Survey shows that only 13% of business owners reported cyber attacks, but after they were given a list and criteria for attacks, the number increased to 58%. The discrepancy indicates there is an awareness gap, and thus, a larger risk for cyberattacks.
UPS Capital estimates that cyber attacks cost $80,000 - $148,000 in damage. However, it can be hard to estimate the exact costs when determining loss of customer base over time or development costs to fix network systems.
To improve cybersecurity metrics, small businesses should invest in cybersecurity training. While an initial onboarding session can help, continued cybersecurity education is a must for your employees since cybercriminals are becoming increasingly sophisticated. Training and testing sessions can help monitor your team’s knowledge. Even free and paid phishing simulations can send team members fake scamming emails to test their knowledge and ability to identify and alert the company on cyber threats. In addition, small business owners should encrypt sensitive data, and implement two-factor or multifactor authenticatication.
These three metrics can help small business owners analyze the stability and goals of their enterprises. Once these metrics are used to monitor costs and identify investments, both in human and production value, then it can greatly improve the success and stability of small businesses these dramatically shifting business environments.