Metrics. Why are they needed?

When managing your life, when managing your work, when managing your business, you need to accomplish a certain amount of work to get where you want to go.

In general, it is difficult to judge how much work will be necessary to do one thing or another until you actually do it. So you setup goals and draw up plans to reach them and then you try to do all the work you assigned yourself to reach these goals.

One reason an Internet Business has an advantage is because the computer can do a lot of the work for you. It can give you information on how many people come to your website every week, day, hour. It can tell you where these people come from and whether they purchase one of your products. This means it tells you where your money comes from. It helps you gauge where you should advertise more and where you should advertise less.

When you have a brick and mortar business, it is much harder to get proper metrics. In that case you need to ask your customers how they heard about your business and you need to write that down in some ways (be it on a computer.) Then later you need to compile all that data and get an idea of what people buy when they see such and such ad. With the results, you can gauge whether an ad worked.

The precision will not be as good since (1) some people will decline telling you where they heard about your business; and (2) your staff may forget to ask every time. Also you probably won’t write anything down in regard to return customers thinking that since they already are customers… Large corporations, such as supermarkets, offer customer cards in exchange for some rebates (i.e. 2 for one, or 50% off on the second item.) These cards are used just for that purpose. The stores make much more money knowing what their returning customers want rather than spending money in advertising. Imagine that a new type of candy comes out. No one has heard of it. You may think that it is a terrific idea to put them right next to the cashier so your customers can get one before walking out. After a few days, you look at your customers cards and you notice that they bought 3 times more of the old cashew nuts than these new candies. You can remove the new candies and add another one that has cashew nuts in them. It will sell better.

Unfortunately, most businesses are run by 1, 2 or 3 people. Far too few to be able to get enough data to make it worth it. Once your business starts going, you should look for someone who can help you gather useful metrics to continue to grow your business. If you made $200,000 last year and using metrics increase your income by 10%, it will get you at $220,000 next year. Wouldn’t that worth it if you have to spend $5,000 on getting the data?