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When Numbers Lie – Understanding What They Really Mean

When Numbers Lie - Understanding What They Really Mean

You started a product-based business to share your passion with the world. But you can’t do that if you’re not growing. You need to track your numbers, which offers an early warning system to let you know if your product or industry is becoming irrelevant. So needless to say, numbers are important.

But it’s not just revenue you need to pay attention to, especially as a gifter, baker, crafter or maker. Revenue only tells you part of the picture, and only tracking that means you might be operating in the dark.

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 three places where growth in numbers doesn’t necessarily equate to growth in your business.

1) 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 doesn’t necessarily mean that the company is doing well. It’s the engagement that means far more than the vanity metric of follower numbers because people who engage with your social media accounts are far more likely to buy from you.

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

Buying love

It’s (almost) exactly what you think and this is the worst! Did you know that you can purchase “fake” followers on Instagram, Facebook and other social platforms? 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.

Buying social media followers 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.

Of course, you do want to grow your social media following. You do that through being present and active online, publishing a variety of posts that go far beyond simply posting your products. When someone comments on your posts, engage with them. Respond to your followers and comment on their social posts as well.

Like for like

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 potential customer. So your numbers grow but there is no hope of doing business together.

It’s much better for people to find you organically and choose to follow you and engage with your content because it resonates with them.

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 success is misleading. 

Sometimes these followers are great collaboration partners or biz besties. If you notice an active follower whose business is complementary to yours, consider following them back and starting to interact with their content as well. When the time is right, you’ll have a relationship nurtured that you can leverage to collaborate together on a project or product.

2) 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.

But the important thing to consider is how you’ve grown that customer list.

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 the reality is that they received a product they didn’t pay for. They haven’t actually demonstrated that they’re willing to open up their wallet for your product. And that is where customer numbers can get confusing.

Are they truly a customer when they haven’t paid?

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 that 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 your revenue needle. It’s worth developing these relationships because they are your best bet in terms of moving them into the paying customer category.

3) New Social Media App Brings New Audience Members

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 within a short time, you have amassed a decent following on Socialite.

While it may look and feel good to have these “new” followers, they’re not new to you at all.

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. You’re talking to the same people on a new platform – which means one more place you need to show up regularly.

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?

New doesn’t necessarily mean better, so you’ll need to really look at what value this new social platform can bring your business and whether it’s actually worth it to move forward with it. 

Now that you know which numbers to be cautious of in your business, let’s look at some of the important numbers you should track.

Old Fashion Sales Reports

Ah! The good ole, tried and true profit and loss statement (P&L). Your P&L is probably the most important number to track in your product business because it shows true numbers that relate directly to the success of your business.

With a P&L, you see 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 when you reduce costs, increase 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 on your P&L if this is all new to you:

Overall Sales

This is how much money you’re bringing in based on how much you’re selling. It’s your high-level revenue, which I mentioned earlier wasn’t the most important thing to track – but it is a good indication of whether your business is growing or not. Your overall revenue number will help you understand if you are increasing, maintaining or losing business and 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

You need to know how much profit you’re making on the goods you sell, based on the price you’re selling it at. This helps you understand when you can offer a promotion and what your profit will be so you can make an educated decision about whether a sale is a good idea or not.

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, which includes the materials you used and the time it took to make the bracelet.

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 promotion 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

Expenses go well beyond your time and the cost of materials to make your product. You also need to consider all the other expenses in your product business like 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.

Many business owners forget that 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, all these numbers are easily accessible by creating a report. If you aren’t using any system yet, you should seriously consider it a priority to get started. It’s so difficult to truly get a gauge on the numbers in your business if you’re not looking at them on a monthly basis.

If you’re not ready for the investment, you can manually gather these numbers and start understanding their trends.

Watching the right numbers in your business 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. Stop relying on vanity metrics like Instagram followers or email list subscribers and start looking at the true numbers you can use to measure success in your product business.

Make sure you’re tracking the right ones!

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For more free business support consider listening to my podcast Gift Biz Unwrapped where I interview gifters, bakers, crafters and makers who share how they started and built their businesses. Want to talk with me directly? I’m only an email away. I’d love to hear about you, your business and what you’re working on right now. sue@suemonhait.com

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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