Doctors in the developing world measure their progress not by the aggregate number of children who die in childbirth but by the infant mortality rate, a ratio of the number of births to deaths.
Similarly, baseball's leadoff batters measure their "on-base percentage" – the number of times they get on base as a percentage of the number of times they get the chance to try.
Better than the blunt measuring stick of an aggregate number, a ratio expresses the relationship between two numbers, which gives them their power.
Here's a list of seven ratios to consider tracking in your business:
1. Employees per square foot
By calculating the number of square feet of office space you rent and dividing it by the number of employees you have, you can judge how efficiently you have designed your space. Commercial realtors use a general rule of 175 square feet to 250 square feet of usable office space per employee.
2. Ratio of promoters and detractors
Survey your customers and ask them the question: "On a scale of 0 to 10, how likely are you to recommend [insert your company name]to a friend or colleague?"
Figure out what percentage of the people surveyed give you a nine or 10 and label that your ratio of promoters. Calculate your ratio of detractors by figuring out the percentage of people surveyed who gave you a zero to six score.
Then calculate your Net Promoter Score (a way of gauging customer satisfaction by asking that single question that is predictive of both repurchase and referral) by subtracting your percentage of detractors from your percentage of promoters.
The average company in the United States has a Net Promoter Score of between 10 per cent and 15 per cent. According to Satmetrix's 2011 study, the U.S. companies with the highest Net Promoter Score are:
USAA Banking 87 per cent
Trader Joe's: 82 per cent
Wegmans 78 per cent
USAA Homeowners Insurance:78 per cent
Costco 77 per cent
USAA Auto Insurance 73 per cent
Apple 72 per cent
Publix 72 per cent
Amazon.com 70 per cent
Kohl's 70 per cent
3. Sales per square foot
By measuring your annual sales per square foot, you can get a sense of how efficiently you are translating your real estate into sales.
Most industry associations have a benchmark. For example, annual sales per square foot for a respectable retailer might be $300. With real estate ranking just behind payroll as a small business's largest expenses, the more sales you can generate per square foot of real estate, the more profitable you are likely to be.
4. Revenue per employee
Payroll is the No. 1 expense of most businesses, which explains why maximizing your revenue per employee can translate quickly to the bottom line.
In a 2010 report, Business Insider estimated that Craigslist enjoys one of the highest revenue-per-employee ratios, at $3.3-million per employee, followed by Google at $1.2-million per bum in a seat. Amazon was at just over $1-million , Facebook at $920,000, and eBay rounded out the top five at $530,000. More traditional people-dependent companies may struggle to surpass $100,000 per employee.
5. Customers per account manager
How many customers do you ask your account managers to manage? Finding a balance can be tricky. I know bankers who are forced to juggle more than 400 accounts and therefore do not know each of their customers, whereas some high-end wealth managers may have just 50 clients to stay in contact with.
It's hard to say what the right ratio is because it is so highly dependent on your industry. I would recommend slowly increasing your ratio of customers per account manager until you see the first signs of deterioration (slowing sales, drop in customer satisfaction). That's when you know you have probably pushed it a little too far.
6. Prospects per visitor
What proportion of your website's visitors "opt in" by giving you permission to e-mail them in the future?
Karl Blanks and Ben Jesson are the co-founders of Conversion Rate Experts, which advises companies like Google, Apple and Sony on how to convert more of their website traffic into customers.
Dr. Blanks and Mr. Jesson state that there is no such thing as a typical opt-in rate, because so much depends on the source of traffic. Rather than benchmarking yourself against a competitor, they recommend you benchmark against yourself by carrying out tests to beat your site's current opt-in rate.
Dr. Blanks and Mr. Jesson suggest the easiest way of increasing opt-in rates is to reward visitors for submitting their e-mail addresses by offering them a gift they'd find valuable. Information products – such as online white papers, videos and calculators – make ideal gifts, because their cost per unit can be almost zero. Using this technique and a few others, Conversion Rate Experts achieved a 66-per-cent increase in the prospects-per-visitor rate for SOS Worldwide, a broker of office space.
7. Prospects to customers
Similar to prospects per visitor, another metric to keep an eye on is the efficiency with which you convert prospects – people who have opted in or expressed an interest in what you sell – into customers.
Conversion Rate Experts' Dr. Blanks and Mr. Jesson recommend you monitor the rate at which you are converting qualified prospects into customers, and then carry out tests to identify factors that improve that ratio.
Conversion Rate Experts more than doubled the revenues of SEOBook.com, the leading community for search marketers, by converting many of SEOBook's free subscribers into customers.
Techniques that were found to be effective included (perhaps counter-intuitively) restricting the number of places available; allowing easier comparison between SEOBook and the alternatives; communicating the company's value proposition more effectively; and simplifying its sign-up process. The trick is to establish your benchmark, and tinker until you can improve it.
Special to The Globe and Mail
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He is the author of Built To Sell: Creating a Business That Can Thrive Without You, published by Portfolio Penguin.
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