Today, I’m going to talk about some numbers and metrics, well, sort of vaguely about them. Because if you have a business, I have said this before, it’s one of these ones I’m going to say again.
You have to know the numbers. The more numbers you know, the better. But there are significant numbers, significant metrics that you should track and you should be aware of all of the time. And especially when it comes to marketing.
If you don’t know your numbers in your business, and this is things like sales and profits and profit margin, if you don’t know the right numbers, it can be too late when you find out that things were not quite as you expected.
For example, in the UK it’s very common for businesses at the end of the financial year to mess about with the books and two or three months after the year, give it to the accountant and say, “Please take your time.”
And you’ve got up to is at nine or ten months to submit accounts to Companies House.
And that means you could be, say, six, seven months in, you get to see the accounts, you are looking at a period that finished six or seven months ago, that started over a year and a half ago.
If you then find out that things weren’t so good, not good, not good at all. And you would have been carrying on without that knowledge.
Do it Monthly
So those are basic things. Personally, I recommend that you do whatever it takes to get your accounts up to date at the end of every month, like big companies do, it can help.
If not, every three months or every six months, don’t wait until the end of the year. Get a good bookkeeper.
But the real numbers you need to be tracking are to do with your marketing, because when it comes to marketing, you spend money to get customers.
And very simply, if the amount of money you spend is less than the profits you make from getting those customers, then that is a good thing.
That means you can do more of it, you can spend more. If you found a magic sauce, magic formula, something that you’re doing that’s working like that, you can do more of it.
In actual fact, there are many marketers in the Internet space and the direct mail space and in the advertising in the backs of magazines and Sunday newspapers where they sell a plant with three other trees thrown in or something like that and all for whatever whatever, you know twenty pounds plus postage and packing, and you think “Wow, what an offer.”
They do that because they know their numbers, they know that they don’t make any money on that at all, they’re lucky if they break even.
However, they do know the percentage of those people who buy, will come and buy something else; so if they are not losing money, they will make profit on the next one.
It’s called on the back end, so it’s not on the initial sale quite often.
Now I don’t necessarily advise that for you, it depends what you are in. For something like my fire safety business, we’re on a kind of B to B where people can buy multiple products, people can buy one offs and buy other things.
But they can buy variations, so it’s not necessarily the type of business model for that.
But in, for instance in my marketing business, in that or in the business coaching or marketing coaching, then I can afford to give away things at the start.
I know that a certain number of my potential clients will come back and spend more in the long term, because you should be in this for the long term.
How Much are You Spending on Marketing?
So, you need to know, obviously how much you are spending on marketing. And that means advertising, but it also means your time.
Because if you’re blogging, say if you are not spending money, I see lots of people say oh, I never spend a penny on advertising.
Yeah, you have because you’ve been writing and you been doing other things that don’t cost cash money, but they cost time.
So record your time spent because you have to have some kind of metrics.
Other things are conversion rates, you need to know the conversion rate. So for instance for every one hundred people that come to you, to look at your offer, how many of them actually buy and take the offer?
I know this may be for every hundred you may have thirty people take it up; and of course you might not have so many, you might only have ten people a year who come along.
But if three of them, four of them or seven of them take up your offer, you can work out your conversion rate.
If you say ten people come along and three buy it, that’s a 30% conversion rate, okay. So know your conversion rate, k now how many convert.
And, it’s not always converting into a sale, it could be a converting into lead, into a onto your database into an e-mail list, so know conversion rates for different metrics.
You should have goals whenever you advertise or do any marketing, you should have a goal and it doesn’t have to be a sale, it can be to get people onto a list, so know the conversion rate of that too.
Average Order Levels
Quite easy, because if you know the average order level, the amount, the average spend, so the average basket amount, if you can do little things to get that amount up, you can increase sales, total sales.
If the average person spends one hundred pounds, how about if you can get them on average to spend one hundred and three pounds?
It may not seem a lot, but you’ve just increased sales by 3%. Has it cost you anything? What did you add in? What did you do?
Think of ways of getting that up, but without knowing the average order value, and that is quite simply the total sales turnover divided by the number of customers that bought. Easy.
So, then you can work out the lifetime value. Now this is something a bit more tricky because it depends on what you call someone’s lifetime value.
But if you know how much they’re going to spend in their lifetime, now it may be over a couple years, it may be over a year, you decide what’s going to be significant for you.
I mean, for instance, if we sell and service fire extinguishers, people might have them for ten years, but we can’t base it on ten years, we base it over a couple of years, how much they are likely to spend in a couple, how many times they are likely to order, and so on.
We can do all that once you know those figures, you can work out lifetime values.
These are the things you need to know, these can save you spending lots of money and it can save you a lot of money.
So know the numbers. If you don’t know how to work it out, get some help, ask around. Again, go to a Chamber of Commerce or go to your accountant even possibly; quite often in my experience, accountants don’t really know these things, but give it a go. That’s my advice.
Tuesday Toolbox Tip
Today, it is a Tuesday, and that means today is toolbox tip and here is one. Can you believe this is free? So there’s a company called Peek User Testing. So if you have a website and you wonder what happens when people come to your website, they have a service where you can pay them and they will have real visitors take actions, or try to take actions and they record it. It is all special stuff, you can go to the website. It’s all done in a special way, you have to go the website and see how it works, but it really is free. In fact, I think they have got a video or a little page on it that says “This is a really free.” It really is, I can’t believe it and user testing is one of the great ones that’s doing this. Amazing. Click here to instantly download our FREE Book “The 71 Ultimate Marketing Tools”
So my recommendation, go see what they can do for you. You don’t have to be an e-commerce, you don’t have to be selling stuff, you can have them take an action.
Just go and have a look, see what they got to offer, it is free. Okay.
And by the way, tomorrow we’ve got the expert interview series, we’ve got Peg Fitzpatrick. Peg is brilliant, she’s a social media genius and she’s great fun.
So don’t forget, it’s not me, not on camera, no video, fantastic interview, she gives us great information. I love Peg, she’s got so much to offer. Be there Wednesday, you’ll love it and I’ll see you on Thursday.