How do you measure your company’s performance?
Here’s how not to do it: by following your gut feeling. A successful business requires a thorough analysis on the work, sales, and financial results. And it can’t be done without tracking relevant business metrics, a measurable value that shows the progress of a company’s business goals.
There’s an acronym out there: KPI. It stands for Key Performance Indicator.
But if you research KPIs and try to figure out which metrics are the most important ones for your business, you’ll find hundreds of these things – most of which are irrelevant to education consultancies (churn, for example, is absolutely useless when your customers will not be coming back because they’ve gone to school!). And there’s no use measuring all of these anyway — depending on your business goals, you should be tracking metrics that really show you how your business is doing. Tracking irrelevant KPIs will end up in a wild goose chase, stressing about numbers that have no actual impact on your company’s development.
Here’s the deal: you need to carefully select the key metrics you’re going to use to measure the success of your business.
In fact, you should avoid tracking more than 10 at a time. A few key metrics will make it a lot easier to keep track of how your business is progressing and pull out insights that will help your consultancy grow. If you track dozens of metrics at a time, it’s nearly impossible to determine trends you can act on.
There’s just too much going on.
So here’s five KPIs you should be focusing on, as an education consultancy.
Month-over-month sales results will tell you if your marketing efforts are paying off and if you’re still in the competition. Sales results are affected by a huge amount of factors — changes in the market, competitive actions, or previous marketing campaigns.
However, if your consultancy’s revenue relies heavily on the application cycle (picking up in August and calming down in January, for example), you’ll always see a heavy spike in those months. A year-to-date growth measurement would work better then (provided you’ve been in business for a couple of years). Sales Growth Year-to-Date indicates the pace at which your company’s sales revenue is increasing or decreasing, and is a better indicator of success for seasonal companies.
Average Revenue Per Customer
This one’s pretty straightforward — it’s the average revenue your customers make you. The key to increasing this is through up-sells and cross-sells.
An up-sell moves the customer to a more expensive version of your service, like upgrading their plans. Cross-sells are extra features you sell with your service — some examples are essay editing or test prep.
For example, when Dropbox convinces me to move from a 1TB to a 2TB plan at $4 extra per month, that’s an up-sell. When I purchase the Extended Version History add-on at at additional $39 per year, that’s a cross-sell.
The goal is to build systems that steadily increase the revenue you’re receiving from customers. This metric tells you whether or not you’re succeeding. Compare it month-on-month, or even year-by-year. You can calculate this by dividing your revenue by the number of customers for any given period.
Cost of Acquisition
Marketing can get expensive, and the wrong channels can destroy profit margins. The only way to avoid this is to track the cost per acquisition of campaigns.
Simply add up all your expenses for marketing and sales last month. Divide that number by the total number of customers acquired during the same period. This will give you the average amount that you spend for each new customer.
For example, if you spent $8000 on marketing in September and acquired 40 customers, your CAC is $400. Now compare this with the average revenue per customer.
If you’re spending more money to acquire customers than those customers will give you, then your business has a problem.
Qualified Leads Per Month
As your business grows, you’ll be able to invest more resources in marketing and sales. Soon, you’ll have hundreds of new leads each month — but not all of these leads have the potential to become a customer. That’s why, instead of measuring the number of leads per month, you need to measure the number of qualified leads per month.
Qualified leads refer to the people who have expressed interest and you’re reasonably confident in purchasing your service. If you’ve scheduled a consultation, exchanged phone numbers, or tentatively discussed pricing, they’re a qualified lead.
If or when you have a dedicated sales team, this can be split into three distinct groups or more: marketing qualified leads (leads qualified by the marketing team on the premise that they’ve demonstrated interest in your service), sales-accepted leads (leads the marketing team has forwarded to your sales team and are waiting to be vetted by a sales representative), and sales qualified leads (leads qualified by the sales team that have the highest potential of becoming paying customers).
This metric shows whether you’re targeting the right market with the highest potential of attracting new customers. If the number of qualified leads is declining, you may need to re-evaluate your marketing campaigns or sales strategy.
Met or Overdue Milestones
Checking the number of met and overdue milestones gives you a quick overview of your team’s capacity. Milestones can be business-focused, like doubling your sales revenue next month, or people-focused, like having ten students submit their applications this week.
If your team constantly crosses deadlines and milestones, it should raise a red flag. There are three reasons to watch out for: unreasonable expectations, insufficient resources, and low productivity. After you’ve discovered the problem, focus your energy on resolving it.
You can measure this with a student management platform like Cialfo. Once you’ve set up student profiles and plans, simply head over to a student dashboard and start working on them. The Status Tracker will give you a bird’s eye view of your team’s productivity and milestone status (missed, in progress, and achieved).
Instead of getting overwhelmed with dozens of KPIs, limit your key metrics to a select few. For an IEC, these are your top contenders:
- Sales Revenue
- Average Revenue Per Customer
- Cost of Acquisition
- Qualified Leads Per Month
- Met or Overdue Milestones
Did we miss one of your favourite metrics? Let us know in the comments!