If you're a small business owner, you're likely bombarded with questions every day.
One of the toughest is always, "how's your business doing?"
There's never a straightforward answer. For a clear picture, you really need a number of different metrics at hand to see how your business is performing. Cash flow is one way to assess a business's health. Another is looking at your business's bread and butter: sales.
A good grasp of your sales numbers will show you how well your business is doing and give you insights into what can be done to increase profitability. Having spent most of my career in sales, my advice to business owners has always been to look at 4 key areas:
1. Sales performance over time
A great way to see how well your business is doing is to track growth in sales revenue over time. You can do it over various periods, such as daily, weekly or monthly. Identifying trends can help you make key decisions, because by forecasting sales in future months, you can decide how best to plan your staffing or stock level for optimum gain.
2. Performance of each product
It's really useful knowing how well each of your products or services is selling. This helps you to do two things: promote best selling products to boost sales further, and decide which products need more marketing (or perhaps a change in the way you advertise them). It's also worth looking out for the number of items per sale. If you're often seeing only one item per transaction, then offering discounts on popular combinations of products or multi-buys of the same product, can increase revenue per customer.
3. Most profitable products
You should also know which products and services have the highest profit margin. This can help you do a number of things: focus on areas which create the most value for your business, limit stock levels of products with smaller margins and work out strategies for price changes and supplier agreements.
4. Customer acquisition costs
Attracting new customers is vital for every business, so you need to know how much acquiring each new customer costs. Advertising is expensive, so by working out which activities have been most cost-effective, you can fine tune your overall marketing and business development strategy to attract more customers at the lowest possible cost.
Looking at sales numbers is one way of seeing how well your business is doing. Your cash flow and staff metrics also tell an important story. To find out how these indicators can reveal your business's health as well as give you valuable insights to help you make better decisions for your business's future, visit 9 Spokes.