Knowing what to focus on at each growth stage is essential when you’re a small business owner. You have limited resources, a big vision and a lot of pressure. Because of this, small business owners sometimes follow the “Hit and Hope” approach – the way a beginner pool player strikes the cue ball without actually aiming for anything, but hoping something sinks. I’ve found myself doing this a number of times, and it’s always helpful to use metrics and business growth stages to regain my focus.
A good way to get perspective on what needs to be done is to first imagine how your business will grow over time. Next, focus on where you are now and what is most important for your current stage of growth. This will help you prioritise what’s most important.
At Yoco, we’ve walked the path from a small band of four founders to a passionate team of 50 talented people. What we focus on now is very different to what we focused on in the beginning, and while our mission to empower entrepreneurs remains a constant guide, our immediate focus and key metrics continue to evolve.
After analysing our own growth we’ve identified with these four business growth stages
Knowing your business growth stage and focus is a great start, but it’s critical to implement metrics. Having focus without tracking metrics is a bit like trying to win a sports match without keeping score. You can’t align your team, measure your success or know how to improve.
Let’s take a look at what business owners should focus on at each growth stage and how they can align their metrics.
The ‘Start’ Stage: Product – Market Fit
It’s important to understand and monitor your sales from the very beginning. Even if sales are so low you can recite them in your sleep, you should still track and record them. It’s a good habit to get into and you’ll thank yourself later.
Along with sales figures, keep track of who is using your product and what they like or what could be improved. Make experimenting part of your daily tasks.
Maintaining a record of these learnings should help to improve your product, including what your customers want, what they are willing to pay, and how much you should or could charge. If you start worrying about how to scale and how much profit you can make, stop yourself and refocus. The most important thing right now is how to improve your product or service, and make your first customers so happy that they’ll come back for more.
Yoco started with five beta businesses – most of whom were friends of friends. We did personal deliveries, tracked how they used the app and recorded every complaint, compliment and suggestion. One of our key metrics was the transaction error rate and how likely customers were to refer others to us (net promoter score).
The ‘Build’ Stage: Streamline your processes
By now, you should have a product or service that your existing customers love and a market that wants what you have to offer. If you feel like there is too much demand and you don’t know how to keep up, then it’s definitely time to refocus.
Your focus needs to shift from improving your product to formalising your business. Meet the increased demand by getting the right tools, people and structures in place. For example, a simple customer engagement and back-office system will help you deal with additional customers and suppliers.
This growth stage will require you to go beyond just tracking your sales, but now to include the tracking of ‘jobs to be done’ by you and your team. Your starting point should be to think about these metrics from your customer’s perspective – what do you want your customer to experience when dealing with your business, and then work back to what has to be done internally to make that experience possible.
Your metrics are a way to keep track of whether you are meeting your customer’s expectations, and quickly identifying if you have missed something so that you can proactively resolve the issue with the customer. These are the processes that will allow you to optimise your product or deliver your service at scale.
When Yoco was at this stage we had about 200 customers. We increased our operations team and focused on how our customers were on-boarded and received their card readers. Our focus metrics were: Time taken for someone to sign-up online, how many days to deliver a card-reader, the number of support requests received, and import batch sizes for our card readers.
The ‘Grow’ Stage: Optimise sales and marketing
Once you have a stable operation and are consistently meeting customer demands [without impacting the customer’s experience], you’re at the beginning of the ‘Grow’ phase and ready to focus on exponentially increasing demand.
During this stage, you want to be able to focus on one or two metrics that are clear indicators of growth for your business. The number of new customers or the amount of revenue per month is a good example, but remember each business is different. The metric should be straightforward and something that is relevant to everyone in your team.
Tracking these metrics every week or month allows you and your team to have regular, focused conversations about what is holding you back from growing the business and suggesting ways to improve in order to achieve your targets. The goal is to learn how to control key metrics and know what factors will (and won’t) influence them. For example, having a 20% off sale will result in approximately X new customers and Y revenue. Hiring an additional sales person will lead to X more phone calls and Y more customers.
Toward the end of this phase, you want to focus on how much it costs you to acquire a new customer and the profits you’re making per customer. It is important that before you start scaling, you’ve made your operations so efficient that you’re able to gain more profits from your customers than what you’re spending to acquire them.
When Yoco crossed over the 1000 customer mark we were in a position where we were confident in our product and the quality of service we offered. Our focus switched to testing new growth channels, partnerships and sales processes. Our focus metrics were now conversion rates, daily sales and cost to acquire a customer.