When Numbers Lie – Understanding What They Really Mean

When Numbers Lie

 

Tracking numbers is the best way to know if your business is growing. It’s also an early warning system to let you know if your product or industry is becoming irrelevant. So needless to say, numbers are important.

The thing is, with our fast-paced technology, there are a lot of numbers you can be watching. Some are vitally important and others aren’t.

How do you know if you’re watching the right ones? And what do they really mean anyway?

Here are 3 places where growth in numbers doesn’t necessarily equate to growth in your business.

Social Media Popularity

The likes, follows and hearts … while they have a place for social credibility, they have no direct correlation to sales. Just because a business with a Facebook Fan Page has 788K followers does not necessarily mean that the company is raking in the dough.

High social media numbers can be acquired in a couple of ways.

Buying loveWhen Numbers Lie

It’s (almost) exactly what you think and this is the worst! Did you know that you can purchase “fake” followers? Yep, you can buy followers so your numbers rise into the thousands! What you have purchased are people in other parts of the world or bots that can’t see your posts much less buy anything.

This is a particularly bad idea if you ever want to advertise through a look-a-like audience – meaning you want Facebook to send your message to people who have the same attributes as those already following you. If you have fake followers, this powerful strategy is rendered useless because it’s comparing against garbage.

Be my partner

Many people offer to trade likes to grow their followers. Have you seen the like-for-like messages? Or the ones that say “I always follow back?” Where this strategy falls down is that those you are trading with may not be your customer. So your numbers grow but there is no hope of doing business together.

Make me laugh

Another audience within your following are people who do and always will get value out of your social media content but will never ever purchase. That is okay. You are putting out quality content to do just that … entertain, inform and motivate.

While these numbers build your social media credibility, focusing on these numbers as a single gauge for your sales uccess is misleading.

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Lots of Customers Equals Lots of Money

Well, yes and no. An increasing customer count helps you understand whether you’re attracting new customers. High retention rates and repeat business shows that you’re servicing them in a way that keeps them around. These are important things to know.

Here’s where this can be misleading.

How have you made your new customer list grow?

Maybe you did a promotion and offered something for free. New people opted in to take advantage of your offer and were added to your customer list. But should these people be included in a new customer count? They received a product but didn’t pay for it.

I would propose that they aren’t really a customer until they open their wallet. It’s at the time that they perform a revenue-generating activity they become a customer. These are people who have bought a product, purchased a service or paid to attend an event.

Back to the folks who took you up on a freebie offer. It’s important to separate these people through your email list tagging or in your accounting program as non-revenue generating but hot prospects. They’ve taken an action even though that behavior didn’t move the revenue needle. It’s worth developing these relationships because they are your best bet in terms of moving them into the paying customer category.

New Social Media App Brings Immediate Large Audience

Run through this example with me. A new social media platform arrives on the scene. Let’s call it Socialite. Everyone’s talking about how you need to get onto this platform. It has new features that will attract a huge audience so you’re convinced you should jump in. You set up Socialite and post about it on Facebook and Twitter. You have a loyal following in both places and surprise surprise, within a short time, you have amassed a decent following on Socialite.

What most likely happened is that your loyal crowd has followed you over to this new platform. What have you accomplished with these folks? They already know you from another platform and are already seeing your content if they’ve been engaging with you.

This is how a quick and large following in a new area does not mean you have captured a new audience. It may be more of the same.

There are instances when this can be valuable. The question to ask yourself in this scenario is what you are gaining from going onto this new Socialite platform?

Is your current following more likely to see your content?
Will you get visibility with others who haven’t seen you before?
Is the platform popular with an audience outside of your current customer profile, i.e. Snapchat catering to the younger demo?

We’ve just reviewed three areas where your numbers are not the ones you should have your eye on to indicate the health and growth of your business.

It’s only right to now tell you which numbers you should be tracking.

Old Fashion Sales Reports

Ah! The good ole, tried and true P&L (Profit and Loss Statement).

Without getting into the nitty gritty here, the P&L shows you important numbers relating to how you are running your business.

Here you can get not only a birds-eye view of your company’s performance but also the details under the numbers. These details show where you can make changes that will bring more money into the company by reducing costs, increasing prices, etc.

A P&L can be intimidating to the new business owner. But it doesn’t have to be.

Here are three important numbers to watch if this is all new to you:

Overall SalesGet Your Numbers from P&L Reports

This is how much money you’re bringing in based on how much you’re selling. It helps you understand if you are increasing, maintaining or losing business. It will help you understand if your advertising or other sales promotions are working. It will also tell you if people are receptive to your products or if the excitement has waned and it’s time for a refresh.

Product Margins

How much does it cost to make your product? Let’s say you make bracelets and sell them for $25. When you sell one, you haven’t made $25. You had to spend money to create that bracelet. These costs include your materials and your time.

Let’s say this sale cost you $12.50 to make. That means you made you a profit of $12.50. That’s important to know.

What happens to your numbers if you decide to do a 50% off promo at a sidewalk sale? Based on our current example, that means you’re selling your bracelets for $12.50 and guess what? Your cost to make that bracket was also $12.50. You haven’t made a single penny!

Overall Expenses

What does it cost to run your business? Here I’m talking about everything from rent, monthly fees for websites and the like, telephone charges, etc. These expenses can get out of hand very quickly if you’re not careful.

Also to note, these costs pull dollars from your profits. So the $12.50 that you made on your bracelet from the previous example continues to get lower.

If you are using an accounting program like Quickbooks, these numbers are right at hand by creating a report. If you aren’t using any system yet you should seriously consider it a priority to get started. But in the meantime, you can manually gather these numbers and start understanding their trends.  I’d suggest looking at these numbers monthly at a minimum.

In summary, watching numbers increase in an area not directly related to sales, may make you feel good but they can make you dangerously optimistic.

Watching the right numbers, however, can be a powerful indicator of how you’re doing. They will allow you to continually move your business forward and become more and more profitable.

So make sure you’re tracking the right ones!

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About the author, Sue

With over 30 years of business development and marketing experience, I've been fortunate to work with hundreds of companies of all sizes. Their needs range from start-up guidelines to advanced business building strategies. As current founder and owner of The Ribbon Print Company, we continue to recognize the need for these services ... not just for our customers but for the gifting industry as a whole. That's where the inspiration began for the Gift Biz Unwrapped Podcast and Blog.

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