In the kinds of very small businesses we talk about at Fizzle, with teams of fewer than 5 people, many with just one person, very little of what we do on a day-to-day is CEO-type stuff.
Most of what we do is run around wearing one of dozens of different hats. Marketing, product development, finance, team building, and on and on.
In a bigger business, a CEO would care about all these things, but they wouldn’t be his or her primary focus. A CEO’s main job in a bigger company should be to own the company’s vision and convince everyone possible of why they should support that vision. Customers, investors, employees, everybody.
Beyond that, a CEO is responsible for making sure the company’s efforts are driving progress toward that vision, and that the business has the resources it needs to succeed (skills, talent, money).
But again, in a tiny business, as we’ve talked about a lot recently, you have to wear a bunch of hats. You have to do the high level CEO stuff, along with a million other things.
And it’s easy to focus so much on DOING the work, that you lose sight of the bigger picture.
So, how do you know if things are going well? How do you assure your CEO self that your “worker bee” selves are doing a good job, in the precious little time you have each month to play CEO?
Why Metrics Matter
This is why metrics can matter so much. By metrics, we simply mean taking measurements of different aspects of your business and monitoring them on a regular basis.
In today’s episode of The Fizzle Show we explain how to play CEO in your business, and the metrics you should follow to keep tabs on everything.
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But first, we should also mention that the metrics that matter will change over time as your business grows.
When you’re just starting out, before you’ve built a product, you should be 100% focused on identifying a need or desire in the marketplace, and on finding evidence that the need is worth trying to fill.
Then, when you get to working on your product, you should care most about: 1) building a product quickly and cheaply (the minimum viable product concept), and 2) growing a following / building buzz.
Finally, after you’ve launched a product, that’s where many of these metrics will come in. At this stage, your job is to make sure 1) your marketing is reaching customers and converting them to customers, and that 2) your product is serving your customers, making them happy, and converting that value into revenue for your business.
Metrics and the Marketing Funnel
So, what should you measure as a business? What report should you provide your CEO self so you can know how the business is doing?
The marketing funnel gives us some excellent guidance. A marketing funnel is simply a model of the theoretical journey a customer takes from learning about your business to purchasing your product and beyond.
One excellent marketing funnel based metrics model (say that three times fast) is Dave McLure’s Product Marketing for Pirates: AARRR! presentation. Dave’s model breaks the funnel into these 5 measurements of user behavior:
- A: Acquisition – where / what channels do users come from?
- A: Activation – what % have a “happy” initial experience?
- R: Retention – do they come back & re-visit over time?
- R: Referral – do they like it enough to tell their friends?
- R: Revenue – can you monetize any of this behavior?
Our system at Fizzle (funnel metrics)
Internally on the Fizzle team, we use a similar model, adapted for our specific business. Every month we update a spreadsheet. We do this manually and it takes maybe 90 minutes. I actually like the ritual of doing this manually because it gives me a chance to pay attention to each number.
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The 3 Metrics That Matter (if you only look at three, use these)
If I had to limit the metrics I tracked to just three, they would include some version of the following:
- Reach (audience growth): how many people are we reaching (for content-based marketing) through our website, podcasts, social media, etc?
- Signups (conversions): how many of the people we’re reaching are converting into paying customers?
- Customer LTV (lifetime value): how much revenue do we earn from the average customer over his or her lifetime? For subscription businesses, this is a function of churn and price. For other businesses, it’s a factor of price and number of products sold.
The beauty of these three metrics is, they form the basis of a calculation that can tell us how much revenue we’re generating for a given timeframe. 10,000 people (reach) X 10% conversion (signups) X $10 (customer LTV) = 10,000 in revenue generated for that period.
To double revenue, you can focus on any one number, or on all three at once. Doubling your reach, doubling your conversion rate, or doubling your customer lifetime value would each double your revenue. Or, increase each by a smaller amount and still reach your goal.