Strategic Growth – How to Take Your Business to the Next Level
As we come to the end of this year’s Small Business Advice Week, September offers businesses the perfect time to take stock of the busy summer period and approach the fourth and final quarter with renewed drive and a fresh perspective. Whether you’re a fledgling start-up or an SME looking to take the next steps, there are a number of resources available to entrepreneurs hoping to grow their business; in addition to arranging a free new client consultation at our Tamworth offices, the Local Enterprise Partnership (LEP) Growth Hub is a great place to start. It connects SMEs with free expert advice, support programmes and funding opportunities available in the area. With a number of paths available, we’ve taken a look at three strategic activities, devised to propel your business in the right direction.
Identify your key performance indicators (KPIs)
It’s likely that once upon a time, your KPIs formed a formidable part of your business plan, yet it’s surprising how quickly (and easily) these can be left by the wayside. While these may take pride of place on the first page of your notebook – or simply be ingrained in your head day to day – take the time to write them down and review them on a regular basis; has anything changed since launching your venture, and are they still relevant? More importantly, how can you use them to better measure the success of your business moving forward? Designed to give you clarification and greater insight, here is an example of five growth metrics you may want to consider:
Churn rate – this is the rate at which your clients choose to leave your business each month. If customer retention is low, you’ll want to identify the reasons behind this as a priority for on-going growth (as this will likely hinder your progress, if there is any at all).
Customer Lifetime Value (CVL) – having analysed your churn rate, the average monthly revenue from each customer can help illustrate their lifetime value to your business. Compare this to the average cost of customer acquisition, and this can prove very useful.
Customer Acquisition Cost (CAC) – armed with your monthly marketing budget, compare this to the average amount of new customers gained to identify how much they are costing to acquire. How does this then compare with physical customer spend per month?
Average customer revenue – how much are your customers spending on average per month? To maximise your revenue, you’ll want to consider how you can increase this figure through cross-selling and up-selling, in turn enhancing the customer experience.
Monthly recurring revenue – you’ll need to track this over several months to acquire an average revenue figure. If you operate on a monthly subscription basis however, be sure to track the ‘recurring’ revenue and monitor how much is gained (or lost) each month.
Track your results (and learn from them)
There’s nothing like enjoying the fruits of your labour, but if you don’t learn from your results – whether good or bad – a positive outlook can prove difficult to sustain (or achieve). To do this effectively, you’ll need to decide what variables need to be measured in order to monitor your success rate – as well as considering how to measure them. There are two methods of data collection that can help you in this instance: active data collection, and passive data collection.
Active data collection – this requires both the knowledge and permission of the individuals suppling the data. As a result, this can lead to ‘observer bias’: the inclination to see what you expect to see, or want to see.
Passive data collection – this means data can be collected with no action required by the collector of data (or the source). This makes it easier to gather and, due to the lack of observer bias, generally more accurate.
For this reason, passive data collection is often the preferred method of results tracking. Once having gathered the statistics required, algorithm-based data analytics can help you interpret them (and thus better guide your future business decisions). No longer reserved for the big data of big corporations, there are companies that specialise in providing this service for SMEs that are easily searchable.
Scale up sensibly
Growth, growth, growth. Experienced entrepreneurs will know a thing or two about the ambitious ‘starry-eyed’ phase of wishing to take a start-up to new heights – sometimes without sufficient regard for the consequences. Yet while gumption is nothing to be sniffed at, scaling up at a pace that suits your business is a more effective way of achieving continued expansion. Investing too much before establishing product-market fit, for example, can result in failure.
Instead, business owners should look to avoid debt and build savings back up in the early stages so as to invest in the future. SMEs could consider a co-working space (as opposed to renting a sole premises), hiring an apprentice rather than an entry-level employee, or implementing cloud-based solutions in place of costly hardware to host data. Whatever you can do to preserve outgoings will only result in more funds to play with when the time comes.