Data, metrics, numbers -- every startup has them (though keep in mind that there are ways to track success that go beyond financial results).
Many of those metrics focus on growth, even though you may have decided your small business shouldn't grow, at least right now.
But all that analysis is just information unless you actually do something with the data you collect. A key driver of small business success is turning data into insight, and insight into action.
When one of the following things happens, make adjustments to your business as quickly as possible.
1. Your customer acquisition costs are rising.
Maybe there's a good reason it costs more to acquire new customers. Maybe you've launched a new marketing campaign. Maybe you've decided the lifetime value of your customers warrants spending more to land new ones. Or maybe you've introduced new products or services with much higher margins that justify greater marketing and advertising expense.
Or maybe you aren't spending your marketing dollars as wisely as you could. It's easy to ignore rising costs when your startup is growing.
Granted, customer acquisition costs should never be evaluated in a vacuum. But rising customer acquisition costs are often a sign of rising underlying inefficiencies and a lack of focus on smart growth.
When you're bootstrapping your startup, growth at any cost is something you definitely can't afford.
2. Your churn rate is rising.
Churn measures the percentage of your customers that stay with you against the percentage of customers that leave over a given time period.
The goal of nearly every business is to keep its churn rate as low as possible, especially when the lifetime value of customers is high. Plus, it's a lot cheaper to sell to existing customers than it is to land new ones.
Keep a close eye on your churn rate, especially if your business involves a subscription model. There are a number of ways to react to changes: change your pricing model, improve customer service, provide additional services, better segment your customer base, better identify at-risk customers, create repeat business incentives, or improve the overall experience for new customers.
If your churn rate is rising, see that as a sign that you've lost touch with what your customers want.
Then take immediate steps to fix that problem.
3. Your margins are changing.
Most businesses have multiple sources of revenue. Changes in the contribution percentage each source makes can indicate potential problems, because changes in revenue percentages and margins can often signal not only changes in customer spending habits but also broader trends in your industry and market.
Say you're in the HVAC business and 70 percent of your revenue comes from new equipment installations, 20 percent from service, and 10 percent from post-purchase add-on sales. If service revenue falls off, that can dramatically impact your overall profit margins, since almost all of your marketing and sales costs go into selling new equipment.
Don't just look at overall profit margins. Analyze trends in margins for a variety of product and service categories. A decrease in margins in one area could signal problems ahead for other areas of your business.
4. Your inventory has grown stagnant.
Some products move quickly. Others move more slowly. Sometimes that's okay, especially if those products are complementary rather than primary, or are designed to round out your total product offerings.
But sometimes it's not. If certain products are moving more slowly that in the past, or if some inventory has become dead inventory, find out why. A few tweaks to your marketing strategy might be all you need to resurrect a dying product line.
Or you may decide to discontinue that product line altogether so you can focus on selling more of the products your customers do want -- or that you can turn a better profit on.
Ultimately, the number you care about most is your business's bottom line.
Knowing how to get to that bottom line is what makes an entrepreneur successful.