It used to be pretty easy measuring success running a small business. If you met your payroll, kept your inventory topped off, paid all your taxes on time, and made a comfortable profit, you were successful.Nowadays, there's the care and feeding of your online store or presence, the vagaries of social media, an ever-more fickle buying public, and change. Lots and lots of change. In everything from how people make buying decisions, to what's important to them, to how they get to work.So how do you - the small business owner, measure success in 2017? As someone who works with startups, entrepreneurs and traditional businesspeople, and as someone deeply involved in a number of technologies from social media to AI and chatbots, I think you need to redefine and reestablish some of the old definitions of defining success.
It Starts With The Numbers
There are plenty of ways of measuring different parts of your business: customer retention rates, inventory turnover rates, comparisons with other businesses in your sector, industry, region. And you might find one or another of these key performance indicators are interesting and important at one time or another as you find your market, refine your marketing, or deal with any one of a hundred small business challenges.But Cash - that is, Profitability, is King. If at the end of your periodic balance sheets you're profit is not climbing, sooner or later your small company will get hit with some business-threatening catastrophe - a flood, a hacker, a very upset major client - and you won't have the reserves to bounce back.There's three fundamental business financial statements you need to be checking regularly to gauge the overall profitability over time of your small business:Your income statements show revenue coming in on a monthly, quarterly or yearly basis: their your first waypoint to measuring your business. Is, allowing for the cyclical nature of your industry, revenue moving up? If it's not, you've got trouble because expenses and costs always go up.Your monthly, quarterly and yearly balance sheets will show how much you owe and own. It's the nature of nearly all businesses that expenses and debt with rise. But are they rising while income is flat?Monthly and quarterly cash flow statements show you for any given period if you have enough cash/lines of credit to handle bills even while you're waiting to get paid.
It's All About Your People
Traditionally, say back in the good old 20th century, keeping your eye on these three reports was enough to keep you on track to be be successful. But that was then, and this is now: you need to think about the people inside and outside your company as well.With employee turnover heading in only one direction - up - as baby boomers give way to millennials, you need to find new ways of measuring and improving employee retention and satisfaction. Every time you need to train or onboard a new employee or lose a valued worker, your small business' operations are adversely effected. Too much employee turnover builds on itself and soon can turn into an avalanche of exits.The other people you need to worry about are those online. Social Media and Yelp! can do wonders for your marketing, but they can overnight gut-shot your company as well. Just ask United Airlines after a recent video showing a passenger being dragged off a flight cost went viral online and lead to an immediate $1 billion market value loss.So there's a relatively new way to measure your small business' success: online sentiment as evidenced by online reviews, follows, comments and tweets. Keep in mind that behind each and every one of those negative hits there's a person who feels let down by your business: customer retention and satisfaction needs to be a constant part of your operations regardless of what or how much you sell.
How Are You and Your Market Doing?
Speaking of selling, how's your market? Whether your business is a neighborhood eatery or global in scope if not size, is your market growing, declining, or holding steady? Knowing your market both quantitatively and qualitatively is extremely important, both in order to find new ways to expand it and to know when it's time to hunker down and ride out the next dip.And, keep in mind that markets while apparently durable can face their own challenges as technology, changing tastes, demographic turnover, and changing values can explode or collapse a given market.You can't always buck the tide - Just as paper map companies. But you can keep an eye on how your market is doing, whether shifts in tastes or tax policy are going to have a huge effect on what you sell to whom.
Keeping One Eye On Technology
And while you're keeping one eye on the market, you'd better keep one eye on technology: your company's technology, your competitors' technology, and technology in general.Consider the state of your company's technology. Whether technology is at the core of your business or on the periphery, odds are very good one or more pieces of your business' operations depends on technology. And unfortunately when it comes to small business, owners tend to be at the back of the market when it comes to adopting new technologies that can make a new, but compelling, business case.Put simply, too many small businesses wait too long before adopting the next generation of technology and spend too little time doing their homework. New technologies abound - SaaS services, cloud storage, digital signature and authentication, in-the-cloud business services, virtual servers, the gig economy - sticking your head in the sand and bemoaning that the old technology still works just fine tends to leave your other end an easy target for your competitors.Whether we're talking hardware, software or business processes available in the cloud, technology change is a massive disruptor moving through industry after industry.Now take a look at your industry as a whole: is it known for adopting new technology early and often? How about your competitors? Where do they sit on the technology adoption lifecycle curve? If your competitors are slower to adopt new, compelling technology, that can be a competitive advantage for your small business. And if you're slow to adopt and adapt, that can be their competitive advantage.
The Bottom Line
Measuring your small business's success has always been subjective. There's no one objective measure that once surpassed means you can rest easy - that your business is a success.In fact if anything, measuring success has become more complicated. Besides financial numbers, there's how your employees view your company, what customers - who are a click away from letting everyone who cares know - think of you, how you're doing in your probably increasingly fickle market, and how your market is doing riding the ups and downs of rapid technological change to factor in as well.All that said, owning your own small business - while challenging - has one of the highest "job satisfaction ratings" of any occupation. According to the Gallup Poll, 8 out of 10 small business owners say they would do it all over again. And how often can that be said for most things?
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