Here are 10 critical questions for small-business owners:

Reading Time: 6 minutes
Read Next post!

Here are 10 critical questions for small-business owners:


What questions should a small-business owner be able to answer? Whether you’re a new or seasoned business owner, here are 10 key questions for analyzing and improving your company.


  1. What problem does your business solve?
  2. How does your business generate income?
  3. Which parts of your business are not profitable?
  4. Is your cash flow positive each month?
  5. What is your pricing strategy and why?
  6. How effectively do employees generate revenue?
  7. What is your customer retention rate?
  8. Will your customers make referrals?
  9. Who are your most valuable – and most costly – customers?
  10. Is your social media strategy effective?

1. What Problem Does Your Business Solve?

Customers with problems are seeking solutions, whether it’s finding a better-fitting swimsuit or an easier way to accomplish an annoying task. Companies should offer solutions that improve customers’ lives. A great company creates value by filling a void in the marketplace.

Why it matters: Why does your product or service exist, and is it working? This is a fundamental question for every business owner, no matter what industry they are in. Being clear on your ‘why’ is an important element in building a brand.


How to answer this: Nail down your ‘why’ before you even start. Practice explaining your business idea to people you trust, like advisors, mentors, family, and friends.

When your business is already rolling, ask your customers directly why they choose your brand. Doing so not only gives you valuable feedback, but can also help improve customer relations. Customers want to be heard, and this can help you form a long-lasting brand community.

2. How Does Your Business Generate Net Income?

A business needs to generate income in order to buy inventory, finance growth, become self-sustainable, and be profitable long-term. Without consistent income, a business can become insolvent and eventually fail.

Why it matters: This question can help you figure out where to focus your resources – and where to potentially cut back in order to remain profitable.

How to answer this: Review your monthly profit and loss statement, specifically comparing sales and expenses. Interpreting data analytics is key to keeping cash flowing.

3. Which Parts of Your Business Are Not Profitable?

Some products and services are bound to be more profitable than others. While some less profitable offerings may be worth keeping around, it’s important to manage ones that are losing money.

Why it matters: For many small businesses, resources are limited. Your business should only support creating and selling things that generate revenue.

How to answer this: Your monthly profit and loss statement can help you specifically compare your company’s revenue, cost of goods sold, and net profit by item.

4. Is Your Cash Flow Positive Each Month?

Cash flow is crucial to understanding your company’s overall financial performance.

Positive cash flow means your cash inflows (sales) exceed cash outflows (expenses), which puts you in a better position to settle debts, reinvest, and grow your business. Negative cash flow means you’re spending more than you take in, which can halt growth and might eventually put you out of business.

Why it matters: If there’s an area of your business that’s generating negative cash flow, you may need to reevaluate your business plan and offerings.

How to answer this: Your monthly profit and loss statement can help you specifically compare your company’s revenue, cost of goods sold, and net profit by item.

5. What Is Your Pricing Strategy and Why?

Pricing is integral to selling a product or service. It can define the product’s value in consumers’ eyes and can drive or hinder profitability.

Why it matters: When is the last time you considered adjusting prices? It can be tempting to keep the same prices, especially if things are going well, but market shifts often require adjustments to your pricing strategy.

How to answer this: Analyze your profit and loss statement. Factor in how the costs of materials and labor have changed over time. Research inflation-related market shifts and how competitors may have adjusted their pricing as a result.

6. How Effectively Do Employees Generate Revenue?

Increasing employee headcount may be a sign of growth, but only if those employees are contributing to the company’s bottom line. Depending on the circumstances, a few highly-engaged employees can increase productivity, revenue, and profit margins more than hiring extra hands.

Why it matters: Is each team member providing a true business value? If not, it’s important to figure out why and how to make changes. You might consider ways to improve your work culture to boost productivity and to help recruit better candidates to join your team.


How to answer this: Review your payroll and categorize each employee as income-generating or overhead. Be honest. Tracking revenue per employee can help you get a sense of how much money each employee generates versus what it costs to keep them on the team. Employees are more than numbers, so you’ll want to complete this process thoughtfully before making any drastic decisions.

7. What Is Your Customer Retention Rate?

Customer retention plays a key role in a business’s long-term success. The goal should be to build a loyal group of customers from which you continue to generate incremental revenue. After all, it costs more to acquire a new customer than it does to retain an existing one.

Why it matters: If previous customers leave as you attract new ones, you are not building a stable company. Aim to increase both new and repeat customers. Losing customers can be a sign of major issues such as poor customer service or a disappointing product. That’s why customer feedback is so important.

How to answer this: Track KPIs such as:

  • Customer attrition rate: the number of customers you lose in a specific time frame
  • Customer retention rate: the number of acquired customers who stay with your company over a specific time frame
  • Repeat customer rate: the chances an existing customer will make more than one purchase
  • Purchase frequency: the average number of orders per customer

8. Will Your Customers Make Referrals?

Referrals are a highly effective way to attract new customers. When customers have a great experience, they’re more likely to recommend your business to people they know and share on social channels. People are more likely to opt for a solution that others have already recommended.

Why it matters: Marketing is expensive. Referrals from existing customers is a cost-effective alternative that requires minimal financial investment. If you choose to invest a little more, referral programs can also be a great way to reward and incentivize loyal customers to make referrals and boost customer relationships.

How to answer this: Ask your customers for referrals, either directly or through anonymous surveys. Make sure to encourage follows, engagement, and shares on social media as well. Ensure you have a way to keep track of all customers acquired through referrals.

9. Who Are Your Most Valuable – and Most Costly – Customers?

Some customers provide more revenue than others, but that doesn’t always mean they’re more profitable. High-revenue customers can be expensive to keep if there’s a high cost associated with serving them. Maybe they stock up only on sale items or discounted goods, or maybe they eat up resources by requiring constant attention or assistance.

Why it matters: Just because a customer adds to your top line doesn’t mean they’re helping your bottom line. Revenue-generating customers can still incur costs by monopolizing your resources, ultimately preventing you from being able to service others and increase profitability.

How to answer this: Review your gross profit by customer, and ask your employees to help evaluate which customers require the most resources. Keep in mind that helping customers is a key part of running a business, but it shouldn’t overburden how the business operates. Calculate KPIs such as customer lifetime value, or the amount of profit you can expect to generate from a customer over the time they are a customer. This will help you get a sense of the most profitable customers.

10. Is Your Social Media Strategy Effective?

Social media can be a great way to reach customers where they spend their time. A strong social media strategy with engaging content can help build brand awareness, generate leads, and grow your audience.

Why it matters: Social media can be a time suck if you’re posting without rhyme or reason – especially if you’re not seeing a return on those efforts. That’s why a thoughtful strategy is important.

How to answer this: An effective strategy looks at more than vanity metrics such as ‘likes.’ Engagement is the key. Use social listening tools to determine what’s driving engagement and website traffic.

The Takeaway

A business that isn’t constantly evaluating crucial questions risks missing key opportunities for positive change and growth. Routinely revisiting these 10 business questions can help you identify the actions necessary to help increase both short- and long-term success.

Read Next post!