When I say, “How do you measure success in business?” what’s the first thing that comes to mind?
Money! Money! Money!
After all, you can’t succeed in a business that no longer exists.
But measurement isn’t just about observing your current situation. It’s about understanding how you got there and where you will (or can) go next.
So while every single handmade shop could just use “profit margin” and “net revenue” to measure their success—and they would technically get an answer—there’s no use knowing that you had a 30% profit margin if you’ve only had 5 sales.
That doesn’t tell you whether you’re likely to get a 6th, 7th or 100th sale. (Because I think most of you would agree that 5 sales is satisfying but not success.)
Side note: it’s actually great to know that you pulled off a 30% profit margin on 5 sales, because it tells you that your pricing system is working! But it doesn’t tell you that your business is working.
Instead, you should choose a handful of metrics to watch or calculate on a regular basis, that give you the wider picture of your business:
- finances
- growth
- customers & customer satisfaction
- your own satisfaction (yes, you’ve actually got to enjoy this thing!).
Choose metrics that suit your situation
Different handmade shops have different goals. These goals depend on the stage of your shop, the type of products you sell, the way your visitors like to buy and even your personal lifestyle goals.
Shops in different situations need different metrics to show their whole picture of success.
Here are some examples to start you thinking about what might be best for your business.
Just starting out
If your shop is brand spankin’ new, there’s no point wasting your time calculating difficult financial metrics. Instead, focus on visitor growth and watch where they come from.
Raw visitor numbers
Break down by marketing channel
Plenty of free time & want a side hustle you love
If you have the time to spend on growing your creative business slowly & steadily, then track metrics that reflect consistent growth in visitors and money coming through the door. You have time to improve things like conversion rates and profit margins without rating your business as “less successful” for you.
Increases in visitors over time
Revenue
Break down by customer types and marketing channels
Full time handmade shop
Being a full time maker is the same as running any business, so it’s time to be your own Chief Financial Officer! Focus on how well you’re converting visitors into sales, whether you’re earning enough money to be sustainable and growing your profit margin.
Conversion rates
Revenue
Profitability
Break down by customer types / target audiences
Selling wedding rings (long research phase)
If you sell big ticket items or products that customers spend a lot of time researching or comparing, then you shouldn’t necessarily expect a high conversion rate. Instead, focus on showing repeat visits and good visitor engagement, which indicates you’re performing well in their pre-purchase phase.
Engagement rates
Visitor frequency
Consider just showing your best performing/most popular marketing channels and/or products. This isn’t cheating! It’s focusing on what’s important to your business and avoiding “noise” that might impact the averages.
Already have a full-time job & need to make this handcrafted biz worthwhile before going “full time”
Plenty of people are in this boat! This is the tricky stage where your wares don’t bring in quite enough money to quit your day job, but you need more time to grow your business to get there. How on earth will you fit everything in!??
Here you need to focus on efficiency and making the most of what you already have. Maximize the value of the time you spend marketing by increasing conversion rates and how much buyers purchase in one go.
Conversion rates
Avg. transaction values
Break down by marketing channels
Profitability
Break down by customer types and marketing channels
Put it all together & watch your progress
BONUS: Download a one page worksheet to record your progress.
1. Write it down
List your success metrics in the worksheet.
2. Decide on your frequency
How often will you check in? Weekly, monthly, quarterly, 6 monthly or annually? Can you automate some of these numbers in a dashboard or report so you can check more often? Write the dates across the top of the page (or do it as you go if you’re checking weekly).
TIP: The bigger your shop, the more frequently you should check your success metrics.
TIP II: Put these dates in your calendar!
3. Check your benchmarks
For each metric, work out your number for today, based on how often you’ll be checking that metric. If you’ve decided that it’s a monthly metric, then record the total (or average) for the past month. Write the date and the values down the page.
4. Set targets
At the far side of the paper, set a 12-month target against every metric. If you have no idea, make a guess (you can change it later). A wild guess is better than no target at all!
5. Record your progress
At your decided check-in dates, record the value of each of your metrics. How has it changed from last time? Is it better or worse? Calculate a percentage change if you like.
If the change is significant or nowhere near where you expected, that’s when you jump into your detailed reports to find out why and what to do about it.
6. Change with the times
The metrics you focus on WILL change over time! As your shop moves through the stages of growth, you switch up your product lines or discover new types of customers, then your ideal success metrics will also change.
Don’t forget to review and renew them at least annually.
You can change your targets too. If they’re completely unrealistic or way too easy, set new ones. Just remember to leave yourself a challenge 😉
Is this all I need to measure?
No!
These “success metrics” are not the only numbers to look at! They’re just the numbers that give you the best picture of your business success (and potential success) at any point in time. You should absolutely look at a whole range of metrics on a regular basis to make day-to-day decisions and make sure your business is on the right track.
Your success metrics are a fantastic starting point for observing and investigating.
Finally, when I say, “Don’t measure your success by your revenue or profit” when you’re just starting out, that does NOT mean you shouldn’t pay attention to your revenue and profit at all! Just don’t judge your progress by it right now.