If you set out to build a successful and growing business, you’ll increasingly find yourself depending on other people. Even the single individual running an online business from the bedroom will almost always rely on others to perform a number of critical roles. It is common to call these other key people stakeholders, indicating they have a real stake in the success of your company.

That stake can involve any number of factors, from the jobs and compensation of key managers to the financial returns of investors. While these shareholders who invest by buying shares are commonly understood to have such an interest, it is easy to forget about all the others affected by how well your company performs and thrives.

Understanding the Players

Entrepreneurs and business owners have a natural tendency to focus on the end goal and the effort it takes to achieve it. However, it is a critical error to forget about those stakeholders who play a key role in helping to achieve those goals. That reality makes it crucial that every business owner take the time to sit and periodically review the different stakeholders they depend upon. In addition to the managers and shareholders mentioned, this group will include:

• Key advisors
• Board members
• Spouses
• Key line employees

In the final analysis, this list can be as long as the number of vital relationships with a vested interest in your success, including key vendors and even your major customers.

Involving the Stakeholder

The exercise of carefully evaluating the contribution of these essential team members will help you appreciate their individual roles and identify ways to make their involvement more effective and efficient. Taking time to communicate with each group of stakeholders is the beginning of that process. You quickly realize it is not enough for your supporters and stakeholders to want you to succeed; you must enable them in assisting you to do so.

Of course, true communications is a two-way street. While you must clearly express and lay out specific and achievable goals and expectations, it is often just as important to listen to what is said to you from those you are seeking to lead. Even more, it is vital to create a culture and environment where feedback is expected, rewarded, and acted upon.

An important element in creating this environment is creating proactive situations focused on communications, planning, and reviews. While it may seem difficult or even pointless to schedule monthly, quarterly or other periodic meetings, these can ultimately make the difference between success and failure, or so-so success and really knocking it out of the park success.

Simply putting a date on the calendar is an important first step. Make the date a priority and set far enough in advance that everyone can schedule around it. Invest some time in planning such a session and send out notes or thoughts about the goals of your meeting in advance. Likewise, be sure to send out follow up information, showing participants you heard and are acting on the information you gained.

Taking such time is a major investment of everyone’s limited time and precious company resources. That demands a real return on that investment. Accordingly, make sure the atmosphere during the actual meetings is collaborative and encouraging. As much as possible, make the event everyone looks forward to, not something to dread.

Remember what Lee Iacocca, one of our nation’s most successful businessmen had to say, “Start with good people, lay out the rules, communicate with your employees, motivate them and reward them. If you do all those things effectively, you can’t miss.”

Why You Want to Know the Size of Your Business Segment

When you are building a new business, or expanding an existing one, it is important to have a comprehensive understanding of the size of your potential market, for a number of reasons, including:

• Having a concrete grasp of your market enables you to explain and sell it to your banker should you need start-up or expansion capital
• Knowing the market will allow you to make determinations as to whether or not you can justify opening additional offices or locations
• When you know the size of the market, often you are able to ‘work backwards’ and determine how much of the market your competitors are taking, which in turn gives you goals to shoot for in your growth.

There are a number of ways to determine the size of your market, and you should familiarize yourself with each of them, and select the data you feel is most appropriate for your business.

Resources to Call On

1) Your local chamber of commerce will have a good idea of how many competitors you have in your segment, and their relative size

2) Since you know a good profile of your typical customer, looking at US Census bureau tables will give you good information about the number of potential customers you have in your geographical area;  understanding the average annual expenditures per customer will give you a basis for projecting the size of the market

3) The Small Business Administration has a sub organization called “SCORE,”  Score is an acronym for the Service Corps of Retired Executives.  Volunteers with this agency are matched with businesses that request help, and you may well find a retired senior executive from your segment of business who is likely to be extremely familiar with the size of market in your city or region.

4) Dun & Bradstreet reports have ranges of revenue for businesses.  Although the information is voluntarily submitted by businesses, the raw data at least provides you with a range of the potential size of your market.

Ballparking

For a crude estimate, if you are an existing business, take your gross annual revenue and divide by the number of transactions during the course of a year.  Multiply this by the number you received from the census date. This gives you a rough estimate of the size of your market.

Virtual and actual reality are additional ways to start to get a feel for your market potential.  In the virtual world, follow businesses on Twitter and Facebook;  the comments from customers will give you some ideas of how much customers or clients spend.

If you are competing in retail, get interns from a local college business class to conduct marketing surveys in shopping malls, or on a most elementary basis, simply count the customers that go into one of your competitor’s locations on a daily/weekly basis.  If nothing else, understanding how many customers your largest competitors are garnering will give you a goal to reach for at your location.

The beauty of online marketing is that you can track everything.  The problem with the ability to track everything is knowing what to track.

  CFO’s value certain metrics, while marketing executives value a different set of metrics.  There are substantive metrics and then there are those “sexy” measurements that are flashy and look good on paper, but don’t really tell a story.

To satisfy the demands of several departments, the right measurements need to account for all of the costs associated with a campaign.  CFO’s will want to track as much of the costs associated with a campaign as possible.  Things like overhead, salaries and campaign specific expenses help CFO’s determine a projects viability.  For the marketing department, analytics like cost-per-click, cost-per-customer and cost-per-follower provide insight into a campaigns performance.

Choosing between all of the available marketing metrics can be a daunting task, but armed with a better understanding of some of the common measurements will allow you to tell a better story.  Recognizing that different people need different information, here is an in-depth look at a measurement that is easy to understand yet tells a powerful story.

Customer Acquisition Cost

The Customer Acquisition Costs (CAC) is a number that satisfies the CFO’s needs while providing an effective measurement for the sales and marketing department.  In its simplest form you take all the costs associated with acquiring customers during a certain time period, then divide that by the number of new customers acquired during that period.  For example if you spent $1,000 on your sales and marketing department (including promotions, programs and salaries) during the month of June and you acquired ten new customers, the CAC cost would be $100.   You can include as many costs in this measurement as you want, but the main thing is to be consistent and track it over time.

If this cost goes up, you know right where to look to see what is driving it.  If the costs associated with your sales and marketing department are constant, then look at the campaigns you are running to determine the effectiveness of each.  On a smaller scale, you can apply the formula to each of the campaigns that you run—using pro-rated shares of expenses and specific campaign expenses—to determine which campaigns provide the biggest bang for the buck. 

Campaign Analysis

Some useful campaign analysis measurements to help you understand what is happening are:

1. Cost-Per-Click. According to Google, Cost-Per-Click (CPC) is the amount you earn each time a user clicks on your ad. The CPC for any ad is determined by the advertiser; some advertisers may be willing to pay more per click than others, depending on what they're advertising.  Each click is considered an interaction with a customer—like a customer walking in the front door—and is the beginning of the lead nurturing phase of the customer cycle. Your cost per click is determined a series of variables—competitiveness, quality score and ad rank—and averaged over the life of a campaign.
2. Cost-Per-Mille.  Cost-Per-Mille (CPM) is also referred to as the Cost-Per-Impression (CPI).  This metric measures the cost associated with a thousand advertising impressions.  This is useful because it allows you to compare costs across mediums.  For example a direct mail piece may cost $500 for 2,000 pieces, resulting in a CPM of $250, whereas a banner ad on a webpage may cost $500 for 200,000 impressions, resulting in a CPM of $2.50 (500/200,000)*1,000.
3. Cost-Per-Action.  Cost-Per-Action or Cost-Per-Acquisition (CPA) is how much you pay to convert a lead into a sale.  Similar to CPC, CPA requires the lead to take a specific action—fill out a form, buy a product—before a cost is incurred.  Like the CPM metric, you calculate the CPA by dividing the total cost of the campaign and divide it by the number of acquisitions.  For example a campaign that costs $200 and generated 50 acquisitions, results in a CPA of $4.

Marketing metrics are useful tools that allow you to understand what is going on in your marketing department.  Gone are the days when companies blindly spend dollars on expensive television ads and not expect to track and measure the results.  The internet has given us the ability to measure almost every aspect of our marketing efforts, the trick is to be consistent and respond to what the metrics are telling you.  Using the marketing metrics mentioned above will give you the insights you need to make the most of every marketing dollar.

When you work for yourself, you’ll find that the business world is filled with terms and jargon that you may not fully appreciate. Knowing these terms is essential to understanding business metrics so you can constantly improve upon what you offer, retain your customers and bring in new business.

Must-Know Business Terms for Your Professional Vocabulary

• Business metrics: Business metrics are quantifiable measurements that you compare to established goals or benchmarks and use to track and analyze the performance of an organization or a specific process. Unlike key performance indicators, or KPIs, business metrics track all the areas of an organization instead of critical target areas. An example of business metric includes comparing the number of sales to past performance.

• Key performance indicators (KPI): KPIs are quantifiable measurements that show the effectiveness of a process as you try to achieve a business goal. Common KPIs include analyzing the growth of the business’ sales revenue or determining the effectiveness of a marketing campaign.
   
• Cost to acquire customers (CAC): Also called a customer acquisition cost, CAC determines the cost of gaining a new customer. To determine your CAC, add the cost of marketing, sales and related salary and overhead expenses, and divide the total by the number of new customers in a specific period. In addition to learning how much it costs to gain a new customer, you’ll have a better understanding of how CAC fits into your operating budget and how much you can afford to spend.
   
• Long-term customer value (LTV): Also called the lifetime value of a customer, the LTV is the amount of repeat business you can expect from a customer. Business owners use this metric to determine how much to spend to on CAC. To gain a better understanding of LTV, you must determine how often the customer shops and how much she spends. When you know this, you can decide how to formulate customer retention programs and services.  
   
• Allowable acquisition cost: Relating to CAC and based on LTV, this is the amount of money you’re willing to spend on every new prospect per campaign. Business owners generally approve allowable acquisition costs as a short-term strategy or if there are cash flow concerns.
   
• Investment acquisition cost: Relating to CAC and based on LTV, this is the amount of money that you’re willing to spend per prospect even though it will lead to an initial loss. Business owners generally approve investment acquisition costs when they’re part of a long-term strategy and when other resources will absorb the losses.
   
• Churn rate: The rate in which a business loses customers. A higher church rate signals higher customer losses and lower retention rates, as well as a rising CAC and decline in LTV.
   
• Unique selling proposition (USP): The USP is what makes your product or service better and different from what the competition offers. You communicate the USP to prospects to encourage them to buy. For example, if you offer HVAC services, you may sell comfort, not necessarily air conditioners. Base your USP on customer behaviors, motivations and buying decisions.
   
• Buyer persona: A representation of your target consumer or the type of consumer you believe is most interested in your products or services. Create a buyer persona based on factors like the target's gender, age and socioeconomic status.
   
• Branding: The act of creating a symbol, name, design or slogan that identifies and differentiates your business and products from other businesses their products.
   
• Brand recognition: The extent to which your target market or the public identifies your brand by its attributes. Brand recognition is successful when target consumers identify a brand with visual cues like slogans, logos or colors.
   
• Competitive analysis: The process of identifying the competition and evaluating their strategies to learn their strengths and weaknesses as they relate to your own service or product. This analysis is vital to a successful marketing plan and USP. As you evaluate your competitors, learn about their past and current strategies, the platforms they use to market their goods or services, the potential threats they pose to your business and the opportunities they may create.
   
• Sustainable competitive advantage: A competitive advantage that’s long-term and difficult for competitors to surpass or duplicate.
   
• Platform: The manner in which your business delivers media content. Examples of platforms include radio and television advertisements, social media posts, websites, blog posts and press releases.
   
• Revenue percentages: Most businesses have different sources of revenue, unless they only sell one product. Revenue percentages refer to the revenue that each product or service generates for the business. Keeping track of this metric can help you see changes in consumer spending habits and/or market or industry trends.
   
• Stakeholders: Any group inside or outside of the business that has a stake in its performance. Such groups include employees, customers or clients, the surrounding community and shareholders.