Many small Ag business owners have a difficult time answering a very important question: How is your business doing?
In order to answer this question, Ag business owners must have a clear understanding of their key metrics, or key performance indicators (KPIs). And while a number of Ag business owners may argue that they don’t have time to spend analyzing data, the fact is, failing to do so could have disastrous effects on their bottom line.
If a business is running smoothly, tracking metrics can seem like a waste of time. A case of, “if it ain’t broke, don’t fix it.” However, keeping up on metrics allows business owners to avoid being blindsided by a drop in revenue or decrease in customer acquisition.
Thankfully, the essential metrics that Ag businesses need to keep a close eye on are relatively straightforward and tracking them doesn’t take a degree in data science. So what, as an Ag business owner, do you need to pay attention to? It comes down to two major categories: financial and customer.
So what are the financial documents that you need to keep a close eye on? They come down to two:
- Cash Flow Statement: If there isn’t money coming in, your business is going to be in trouble. Fast. Many business owners are surprised to learn that even though they have a number of clients, they still have cash flow problems. Cash flow problems in these circumstances usually have to do with accounts receivable. Staying on top of invoices means you will be much less likely to encounter a cash flow crisis.
- Profit and Loss Statement: This statement summaries the revenues, costs and expenses that an Ag business incurred within a specific timeframe. Many business owners are amazed at the wealth of information these statements provide. Spending thousands of dollars on direct mail pieces that are offering no return on investment? That information is right there in black and white. But if you never look at that information, you won’t discover you are pouring money down the drain.
Customer metrics allow you to make decisions that will help you to obtain and retain customers, both of which are essential to the health of your Ag business. Here are what you need to keep an eye on in terms of customer metrics:
- Average Lifetime Value: Do you have a customer who consistently makes significant purchases? Nurturing this customer needs to be a high priority.
- Customer Acquisition Costs: What is the cost of acquiring a new customer? You can control these costs by examining which tactics are the most successful and eliminating those that are unsuccessful. Not acquiring enough new customers? Again, it’s time to examine how your marketing dollars are being spent.
- Customer Retention Rates: How long do your customers stay with you? Do many of them make one purchase and move on? If this is the case, how can you convert them into loyal customers?
- Customer Feedback: Do your customers comment on your business on social media? What are they saying? Are you customers happy with your products and services? Online or phone surveys are good ways to track customer satisfaction and gain insights into what more you could be doing to improve customer satisfaction rates.
- Sales Leads and Conversions: If you are not tracking where your leads are coming from, you will never know which strategies you should be investing in and which strategies you should abandon. These include things like PPC advertising and email marketing. A simple tweak could drastically improve your sales leads and conversion rates but if you never bother to track these metrics, you’ll never be able to make those tweaks.
Examining your financial documents and tracking customer metrics could be the difference between just getting by and wildly exceeding your financial expectations. The key is to take advantage of the data you have right in front of you.