5 Key Metrics Every African Entrepreneur Should Track

You are excited and filled with dreams of success. Maybe you run your own business; you sell beautiful crafts, offer tech solutions, or run a farm. But, how would you really measure whether your business is doing well?

Starting a business is very much like, you took a small plant seed and sow it in the ground. You water it, make sure it gets enough sun, and hope that one day the tiny seed will germinate and blossom into a strong plant.

But how would you know if the grown plant is healthy?

You measure it-check its height, examine the leaves, and assess its overall health.

Just like in our illustration above, if your business is to be healthy and grow, you should track certain important numbers called metrics. These are numbers that would paint a vivid picture of the well-being or otherwise of your business. A tree would need nurturing to grow, just like your business does. And knowing what to measure is the first step.

In this article, we are going to cover 5 key metrics every African entrepreneur should be tracking to ensure business success. Knowing these metrics can tell whether your business is growing, sustainable, or struggling to survive.

Revenue: The Heartbeat of Your Business

I Don’t Know How Much Money My Business Is Making!

Let’s start with something really simple. Say you opened a small food stand in your neighborhood. You sell delicious snacks and lots of people come to buy them. Well, that’s great! But is your business making enough money to keep it alive?

The total money your business earns from selling goods or services is your revenue. It’s like your plant has started producing fruits. You harvest them in a basket and you know how many fruits your tree typically gives you. But if you didn’t count the fruits, you would only be guessing the amount of fruits in your basket.

Why It Matters

If you are not keeping a record of your revenue, you may just think that your business is successful since lots of customers come in. Are you generating enough money to pay for expenses like buying additional snack ingredients or paying those who work for you? If you don’t know, you can be losing money without realizing it.

How to Track It

Tracking your revenues is so easy! All you have to do is write down every sale you make that day in one notebook or on any simple mobile app. By the end of the month, sum everything up to see how much you have earned. You shall now know if your business is actually growing!

For example: Suppose on a day you sell 50 snacks at N500 each.

Your revenue for that day could be calculated as 50 snacks x N500 = N25000.

That N25000 is your revenue!

Expenses: Keeping Track of What You Spend

Where Is All My Money Going?

Suppose you are making N50,000 monthly as revenue from your business, but it’s just one side of the coin. You must also consider your expenses—the money you spend to run your business. These expenses might include the cost of goods, paying those who work for you, or even renting for the space where you operate.

You can compare your expenses as water and fertilizer for the tree in our earlier example. You need to make sure you’re applying them wisely. If you spend money without earning enough revenue, is like you are over-watering the tree; it will hurt its growth.

Why It Matters

If your expenses exceed revenues, then your business will go through hard times. You will, for example, drain all your cash reserves to keep buying materials to renew your inventory or to pay for labor. It is like giving all the nutrients to your tree’s leaves and forgetting the roots!

How to Track It

Keep account of all your monthly expenses. Add them up at the end of each month and then compare with your overall sales. Minimize how much you spend if too much or look for ways to increase sales to have more money left.

Example:

Monthly Expenses: N30,000(rent, materials, and other costs)

Your Monthly Sales: N50,000.

Your Monthly Profit: N50,000 – N30,000 = N20,000.

That’s a good indication.

But if your expenses were N60,000, you would be losing money. Tracking helps you see this early so you can fix it on time.

What You Keep After Costs

Am I Really Making Money?

The revenue is what you earn, expenses are what you spend, but the real gold is the profit after all costs are paid. Profit is like that fruit that, after sharing some with your neighbors, leaves you with plenty for the day. If your profit is low or you don’t have any, then your business won’t last long.

Why It Matters

Too many expenses will not provide a good profit. And without some money set aside, it will be tough to grow a business, invest in new opportunities, or even save up for the future.

How to Track It

You must know your total revenue and total expenses. You can keep an account of your daily, weekly, and monthly profits. To arrive at your profit, simply deduct all of the money you spent from the total revenue you made. Track it to make sure your business is sustainable.

Keeping Customers Coming Back

Why Aren’t Customers Coming Back?

You must have probably seen companies busy today and empty the next day. They got a good number of first-time customers, but Somehow, struggled to retain them. Keeping them coming back to your business over and over again is important, it keeps your business going.

Think of customer retention like regular tree watering. Unless you continue giving water to it, the tree is not going to grow. Same way, unless you give your customers some reason to come back, your business isn’t going to grow either.

Why It Matters

In general, retaining customers is cheaper than acquiring new customers. Repeat customers turn out to be loyal customers who refer their friends to your business, thus scaling it without the need to pay for more marketing.

How to Improve Customer Retention

The idea here is to create customer loyalty through building relationships with your clientele. Make them feel special. Another great way is to ask for feedback and show you care about their opinion.

Example: If you are running a restaurant, you can provide discounted drinks or food during specific times of the day. It motivates the customers to return and also compensates for their loyalty.

Cash Flow: The Lifeblood of Your Business

Why Am I Out of Cash Even When Sales Are Good?

If you don’t have enough cash on hand, you may still face difficulties even if your business business is making money. The money that comes in and leaves your business at any particular time is known as cash flow. Similar to the air that your tree needs to survive. Just like the air your tree needs to keep it alive.

Why It Matters

Poor cash flow can create some big headaches, such as causing you to go into debt or not being able to purchase more stock because you don’t have money on hand. Even a business that generates good revenue may be forced to fail if cash is not efficiently managed.

Cash Flow Management

Ensure you can always pay your bills on time. Do not be over extravagant; have a cash reserve, as one saves a little water, just in case his tree needs some water later. Planning ahead can keep your cash flow healthy.

Your Business. Your Success

Just remember, starting a business is a journey. Sometimes things will go smoothly, and other times you’ll face with challenges. In any case, monitoring these key metrics can better position you to handle whatever comes your way. With care, patience, and attention, your business tree can grow tall and become very strong, producing fruits for many years to come.