The same thing happened every year at LogoMix: even though in November and December we used historical data to create sales forecasts for the following year, we saw significant growth the first two weeks of January-- often 25 to 50 percent higher than our previously highest month.
Why? Many entrepreneurs used the new year as their trigger to start a business. Others budgeted to start the new year off with a marketing bang. Regardless of the reason, it kept happening, and over time we learned to adjust our sales forecasts accordingly.
And we learned to use those first few weeks, and in a broader sense, our first quarter results, as a guide to what was working, what was not and how we needed to adjust our short and long-term plans based on those results.
Sometimes that level of growth uncovered infrastructure issues we were unaware of. Or sometimes that level of growth pointed out weaknesses in customer service that needed to be addressed. For example, the support we had in place was insufficient, and we needed to hire more people or automate more processes.
That's what happens when you grow fast (and may be a reason you actually decide not to grow your business, at least right now).
While experiencing rapid growth (or, conversely, declining sales) can not only uncover areas your business needs to improve, it can also serve to distract you from issues you need to fix before they become major problems.
That's why you need to go deeper than simply evaluating success against key milestones like revenue targets, overall profits, user/customer growth, etc.
How those results were achieved can matter just as much.
Take a metric like Customer Lifetime Value (CLV). The goal of almost every business-- especially a business based partly or solely on a subscription model-- is to create long-term customer relationships.
CLV is a great way to evaluate the quality of your customer service (as is your Retention Rate). Granted, some customers leave because they don't like your products or services, but many leave because your customer service is poor. How can you know? Ask your customers. They'll tell you. Then check out the feedback left on review sites.
Or take a metric like Customer Acquisition Cost (CAC). The cost of acquiring a new customer is a great way to evaluate your marketing and advertising strategies. In a perfect world, CAC should fall as your business grows and word of mouth, referrals, positive reviews, etc. help generate a percentage of your new customers.
On the other hand, a rising CAC may be justified, especially if you've introduced a new product or service. Or, if you've found a way to generate higher margins and can offset a higher CAC through operational efficiencies.
Another area to evaluate is inventory turns (even if you're in a service business, you can see certain services as a form of "inventory" and evaluate the rate and volume at which they were sold).
Some inventory may have moved more slowly than in the past. Some may have stopped moving altogether.
Maybe the right move is to discontinue a certain product or service. Maybe the right move is to tweak your marketing strategy. Maybe the right move is to bundle a slow-moving product or service with a complementary item, or an item that already sells well.
They key is to look beyond the basic first quarter financial results. Look beyond how your business tracked against major milestones. Knowing "what" is certainly important, but knowing "why" and "how" things happened will help you make smart changes to your business -- and help set you up for not just a successful quarter but a successful year.
And for building a successful business over the long term-- which is the term that matters most of all.