January 25, 2017
While metrics are an important tool for measuring results, small business owners should be wary of relying too heavily on certain ones.
Metrics present business owners with a method of measuring results, but not all data is useful. When used or interpreted improperly, a small business will become less productive and overwhelmed.
A few of the common issues when working with metrics include:
- They can’t — and don’t — measure everything
- They’re easily misinterpreted
- They can be manipulated
- They don’t tell business owners what to do with the results
Take the fast-food industry as an example: Metrics are used to measure sales, delivery time and employee productivity. Individuals are penalized for not meeting quotas. One way to manipulate that data is to have customers pull ahead to a waiting area away from the company’s counter. Customers may wait 10 minutes for their order to appear, but the counter shows the purchase was delivered in under two minutes.
I’ve encountered this same issue in my industry, medical billing software: it’s important for an insurance claim to be submitted as quickly as possible, because it can take 30 to 45 days before the practice gets paid by the insurer. It doesn’t matter if the doctor completed the note quickly. What matters is whether the biller send the claim to the insurance company right away.
What to Look for in Metrics
Metrics must meet three criteria to be useful in a business plan: they must be actionable, accessible and auditable. Actionable metrics provide information that can be acted upon, and improve the ability to meet a business’s goal.
An accessible metric is available to everyone, can be understood by anyone who needs it, and shows whether tangible progress is being made toward the end goal of profitability. This could include statistics to determine the predominant age of customers, retention or referral rates.
Auditable metrics are able to demonstrate a positive impact on the business: they provide transparency and present the data in a straightforward manner. Created using primary data, auditable metrics don’t require multiple intermediate steps to arrive at the summary and can be easily verified.
Avoiding Vanity Metrics
Relying on vanity metrics is a common mistake. Page views, emails and downloads don’t equal sales. The data that owners of a business should be concerned with are active users, the cost of new client acquisition, engagement and revenue. Let’s take the field of physical therapy marketing and physical therapy newsletters (what my business does), for example: it doesn’t matter if a patient opens an email; it matters if the patient reads the email and then contacts the clinic to schedule an appointment.
Traffic is the most frequently used indicator for content marketing success, but it’s highly misleading. A website may report 1 million searches, but this could just be a sign that the searcher isn’t obtaining the desired results.
The Dangers of Relying on a Single Metric
The metrics that business owners use to determine success can actually mask a variety of potential problems.
Let’s take a physical therapy business that uses patient satisfaction as its metric. If patient satisfaction rises, the physical therapist automatically assumes that the practice is growing as a result of his or her content creation or other efforts. An examination of patient retention shows that the clinic actually lost patients. The combination of information really shows that satisfaction increased when dissatisfied patients left the practice.
Relying on a single metric is detrimental. Metrics on social media pages can be especially misleading: fans, followers, likes and tweets don’t make a business profitable. It can be the starting point for capturing leads, but unless those individuals are actually making an appointment or becoming active patients, the numbers shouldn’t be utilized as a measure of success.
Knowing Your Limits
Metrics can’t measure everything. They provide data about quantity, but they’re imperfect and can’t provide information about quality, satisfaction, preferences and other subjective criteria. Client decisions are colored by emotional responses. An alternative measurement option is to measure a business’s qualified leads, and that doesn’t mean simply pulling a name from a list of newsletter subscribers.
The overall client experience is just as important as the treatment when marketing. The things that make customers feel valued and contribute to return business and word-of-mouth advertising can be difficult to discern, and metrics that are easiest to track don’t necessarily provide the most important information or may not be captured at all.
Metrics are an integral element in any business plan, but the wrong metrics could wreak havoc with the profitability of a small business and lead owners to make decisions that are ultimately detrimental. Use them wisely.
This article is courtesy of BusinessCollective, featuring thought leadership content by ambitious young entrepreneurs, executives & small business owners.
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