Most people who are not me are not about quantifying things. Because even when you attach a number to something, you’re left with this question floating in the air: “What does it mean? Good? Bad? Laughable?”
Sort of a philosophical question, really, which is practically the opposite of why people start looking at the numbers in the first place.
So, how do you figure out if your numbers are normal?
Do Some Comparison Shopping
I mean, come on, you can’t have ‘normal’ without a baseline. And where do you get that baseline from? Other people.
You can start with googling. Something like [Average sell-through rate in [industry]] would be a start. “PPC cost on Facebook in [industry.]” It’s important to include your industry or your results will totally useless.
Googling isn’t super-duper useful for the simple fact that people at our scale don’t have a bunch of consultants and industry press that discusses such benchmarks. They best you will likely find is some forum messages where people in your industry discuss their numbers. Which, coincidentally, is exactly what you’ll recreate in the next step.
You can do this in either a general or a specific way— by which I mean, you can go to a Facebook group and say, “Hey, what’s a good conversion rate at the end of a 5-part opt-in series? Anyone have experience at different price points?” You’ll get a range of answers, but not a lot of control for people in your industry or at the same stage in business as you. Still, it’s a lot better than a kick in the pants.
You can also be more specific: chat up individuals and ask the same question. This works, but with a few caveats:
- There needs to be a fairly high level of trust. Especially when you’re in the same industry, people would rather tell you their favorite sex position than tell you how many sales they had in their last launch. If you want this radical transparency to work, you might want to lead with your own numbers.
- Entreprenuer friends, regardless of the industry, are the second-best option because they might not have the metric you’re after in their own business, but they likely know other people who do, and can ask around for you. This gets around that icky feeling of over-exposure — sharing numbers with someone who isn’t a competitor, isn’t even in your industry, is a lot easier.
- You can also ask a business coach, or some specific kind of professional (accountant, Adwords manager, marketing specialist) because they’ll have broad exposure to all kinds of businesses and a real feel for the context. For instance a business coach can point out that of course your engagement is likely to drop as your email list size grows.
Run Your Own Race
The second option for figuring out if your numbers are normal is just to figure out if they’re normal for you.
After you’ve reassured yourself that your business isn’t actually a miserable shadow of your peers’, you can turn your attention to the part that really matters: Are those numbers good for you?
I remember last July watching a guy panic as his sales slumped. What should he do? Rewrite his sales sequence? Launch a new ad campaign? I suggested he check last year’s records and see if there hadn’t been a summer slump around the same time the year before. There had been, and sales rebounded as the weather cooled.
Being able to check your numbers against yourself is, in my opinion, one of the best things about being in business a while. Those trend lines are like guardrails. Don’t rock the boat until you check your records.
Of course, you’re always trying new things in your business, so it’s possible that there’s a strange blip because May of last year you had a blowout sale of your whole store and that’s why this May your revenue numbers look anemic. But as time goes on, these things normalize and you see the seasonal swell and retreat of everything— client projects, traffic, marketing pushes, etc, etc.
As you develop this baseline, you will grow in confidence as a business owner.
When to worry, and what else you could be doing
I’ve seen clients worry over their numbers for all sorts of reasons:
- The subjective feeling of “brokeness”
- The inability to link specific marketing efforts to specific outcomes
- The inability to find concrete numbers for a specific metric
- An ‘inexplicable’ dip in just about anything
- A bizarre anomaly in the numbers
We live in a world of imperfect data. Once I convince a client that they have data, and it can bring them answers, they quickly flip, and become frustrated that the data can’t bring them ALL the answers to their questions.
This anxiety works in both directions: Sometimes the data don’t offer clear answers, and we worry about what we don’t (can’t) know. Other times, we bring our anxiety and project it onto the numbers.
In the latter category, I always tell my clients, “Go back to what you need, not what you want.” In general, the anxiety showed up because they started getting ahead of themselves. For example, “If the Q4 sales do well, then we’ll be able to save for a down payment on a house and get married,” which soon translates in emotional terms to “If these sales don’t do well, we can’t get married.” It sounds silly when you write it down, but our lizard brains are funny that way.
When the data aren’t offering clear answers, we have to shift our expectations a bit. Instead of ‘answers’, think of ‘suggestions.’ (As in, “the data suggest…” rather than “the data confirm”).
I use two main methods to find suggestions: clustering, and inference. Inference is when we take one set of numbers and use them to extrapolate. To give a very loose example, if one person asks a question, you can assume that at least ten people had the same question and didn’t take the time to ask. Inferences rely on assumptions, but sometimes assumptions are the best you can do.
A more rigorous approach is to find other types of data that point more or less in the same direction. You might see this in sales data; more sales at a certain price point, at a certain time of the month, and in a particular product category might suggest something about your customer demographic that you could market to more strongly. Once you have a hint of a cluster, you can devise a test to try it (do you sell more custom perfumes to 21-25 year olds on Fridays because they just got paid and are treating themselves? Let’s run a #payday #friyay promotion! Then in a few weeks run a flash sale on a Tuesday and see how much of a difference there is.)
I said at the beginning I would tell you when to worry. The truth is, there’s never a good time to worry. You just need to take a deep breath, and go back to the numbers with a curious mind eager to understand what they have to tell you. If necessary, run them past a trusted friend or coach to see if there’s something you might be overlooking.
And if this all sounds like too much for you to dig into, check out my Bonsai Business Intelligence service. (special launch pricing ending January 24, 2017).
Above all, use your numbers to guide you. There’s gold in them.