11 Questions Every Entrepreneur Must Be Able to Answer
As a serial entrepreneur--I founded digital creative agency Ciplex and more recently the social greeting card company Open Me--I'm constantly striving to improve the businesses I'm leading. I do this by regularly asking myself and my team a slew of questions to fine tune what we're already doing and find ways to add value for the future.
I've narrowed it down to 11 essential questions I always want to be able to answer:
1. Is my business scalable?
The long-term advantages of building a scalable business are greater profitability and growth opportunities. You won't have to spend more money to bring in a lot more revenue.
Start by figuring out the lifetime value of your customers, or the dollar value of a customer relationship projected into the future (here's more on how to do that). This essentially tells you what a customer is worth to your business. When you factor this in with your customer acquisition costs, you can figure out whether your business can scale based on your current products and strategies.
2. What are my visitors, users, and customers worth?
These three audiences vary in terms of their identity. So let's break them down: Visitors are people who frequent your website; a user is a converted visitor that signs up for your website or downloads an app; and a customer is someone who makes a purchase from your business. (You might not necessarily have all three of these segments.)
It's important to understand how much time and resources are necessary to allocate toward each of these three audiences. Visitors, while likely greater in number, yield no revenue as compared to users and customers. Customers make up less of your total audience, but they will yield a greater income. Understanding the return on investment for each of these groups is key to making sure you're allocating time and resources appropriately.
3. Am I acquiring visitors, users, and customers for less than they're worth?
Have you considered your customer acquisition cost lately? At what point do you break even?
Some businesses, like e-commerce sites, convert visitors to customers and completely skip the user phase. Other businesses, like Instagram, transform visitors straight to users, but don't have customers.
4. What can I do to lower my acquisition cost?
It's your duty to look for ways to constantly improve what it costs to acquire users. For instance, your online marketing strategy might involve bidding on expensive, large volume keywords. Instead, consider changing your campaign to a greater number of lower volume, less competitive keywords. You may even consider other tactics like Facebook advertising. There's also retargeting. It's a great way to re-market to the visitor you paid to get there, but didn't convert to a user or customer in the process.
5. How do I increase the value of my customer?
Once you understand the value of your customer, it's important to take steps to increase it. While you aren't able to change the basics of your products or services, you can increase the value of your customer by selling more to them, retaining them longer, and lowering your own costs to serve them.
6. How can I increase conversion rates?
The main step for increasing conversions is to figure out where your users drop off in the conversion funnel--is it on your product description pages, in the check-out process, or somewhere else? Enlist the help of analytics tools like Mixpanel and ClickTale to see how your users behave once they're on your site. You may also want to try using A/B testing through Optimizely to figure out whether your assumptions are correct.
7. What other forms of marketing have you not considered?
Finding the best marketing strategy often involves a lot of trial and error, but it's a smart idea to pay attention to consumer trends.
For instance, consider your mobile marketing efforts. Fifty-six percent of Americans own smartphones. What are you doing to reach them? Make sure your website is mobile-friendly, as well as your email marketing campaigns.
8. Am I innovating?
Sure, you built your business around a solid idea and may have found success. But this doesn't mean you should stop innovating.
Take Blockbuster, for example. As the DVD business declined, Blockbuster neglected to focus on the rise of on-demand viewing. This led the company to lose its spot in the market to companies like RedBox and Netflix, which were more on trend with what customers want now. What can you do to ensure your product or service survives the constantly changing landscape of your market?
9. What are my competitors up to?
Keeping track of what your competitors are up to will keep you afloat. You can stay up to date with their moves with something as simple as creating Google Alerts for them and tracking the latest industry news.
Did a competing company just release an app for their product? It's time to consider what an app could do for yours, as well. Remember, it isn't about doing the same things as your competitors--it's about doing them better.
10. How's my team doing?
If your team isn't thriving, chances are your start-up isn't doing too well either. Make sure they're engaged, motivated, autonomous, and on track with your goals. If they're not, what can you do to remove the obstacles in their way? I've had great success with breaking down company hierarchy and removing set hours so that employees have more freedom to work when they want to.
11. How can I be a better leader?
Your leadership habits directly affect your entire business. It's important to stop to question yourself often. Are you micromanaging? What about struggling to communicate with your team? Self-evaluate and ask partners and employees for regular feedback. Nip these problems in the bud early or you may have bigger problems in the future.
What kinds of questions do you ask yourself and your team?