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Small Business Marketing: 5 Key Metrics You Should Be Tracking

Category: Marketing Published: Thursday, 30 November 2017

Many entrepreneurs disregard the terms measurement and management as company jargon. In actual sense, there is no other way of growing your business unless you track those elements that work and those that don't. Attempting to expand your business without metrics is a lot more like the case of smoke without fire. This overview explains the five key metrics that small businesses can rely on to navigate growth and profitability.  

Cash Flow Forecast

One of the key performance indicators is cash flow. A forecast on the firm's cash flows shows whether their sales and margins are correct. Predicting on your future cash flows is easy. Just, add your business savings to the projected cash inflows for a specific period, say, next four weeks. Also, subtract the expected cash outflows for the same period.

By performing cash flow forecasts, you can pinpoint problems in their early stages. Aside from enabling business owners to anticipate possible surpluses and shortages, cash flow forecasts are necessary for tax planning. 

Revenue Growth Rate

Although this seems like a no-brainer, the revenue growth rate is a measure of how fast your business income and sales are increasing. To find the growth rate, divide your current revenue by the revenue earned in the previous year. 

Analyzing the growth rate on a regular basis helps you to assess whether your business has an upward or downward growth trend. Subsequently, you can use this to make necessary changes that favor business growth.

Inventory Turnover

Another crucial indicator to keep tabs on is the inventory turnover. It measures the frequency of which inventory is either sold or used during a given period. This metric is imperative because it indicates your company's ability to move goods. 

Although businesses strive at getting a high turnover rate, they should go about this the right way. For instance, you need not reduce the price of your goods by a high margin as it may result in losses. Calculating your turnover rate is also crucial in measuring and planning for adjustments in your future inventory.

Relative Market Share

This particular metric indicates just how much of a given market is driven by your company as a percentage. Contrary to internal parameters, relative market share shows how your business is performing relative to other players in the same space. In any case, the profits that your business earns do not matter if you are lagging behind your competitors. 

Accounts Payable Turnover

No company can keep its doors open for long if it cannot pay its suppliers. Accounts payable turnover is a measure of how much the company incurs when paying for goods and services. To find this, sum up the cost of supplier purchases then divide by the average accounts payable. By determining the accounts payable turnover, you can decide if there is need to reduce your spending.

Conclusion

Tracking key performance indicators is your best bet at growing your business. It enables you to cultivate a culture of success as you see the metrics moving in the right direction. Leveraging the latest data not only helps you to discover new opportunities but also to measure the efforts of your business.

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