Every business owner needs reliable figures to regularly check on business performance. Collecting data is useful in setting realistic targets towards increasing your profitability in 2015, and gives a baseline for monitoring your business throughout the year.
Types of measurement data to collect:
- Your annual customer numbers
- Average sales
- Number of customer visits
In a retail store, for example, (although this exercise is appropriate for other businesses), you need to collect the following data from the previous year:
- Number of customers = x
- Average sale per customer = y
- Average number of transactions per customer = z
By multiplying the figures, x * y * z, you can calculate the business’ annual turnover. Ensure this figure equals the total sales for the year.
The next step is to use these figures to set specific targets for the following year and record this data in your business plan, for example:
- Number of customers last year – plus targeted percentage increase
- Average sale per customer last year – plus targeted percentage increase
- Number of transactions with customers last year – plus targeted increase
Increasing your turnover
Small increases can make a significant difference to your turnover. The question is: HOW do you make those increases?
That’s where you need to think about implementing marketing strategies to increase your total number of customers, or to increase the number of transactions made by existing customers.
For example, you could: reward existing customers for referring new people to your business; encourage add-on sales; directly target your customers to inform them of special offers or new products/services soon to be available, or even to inform them of other products and services offered by your business that they may not be aware of.
Maybe your focus for one year will be to increase your customer base; the next, to increase the amount each customer spends on each visit; and so on. Whichever way you plan to raise the figures, the basic measurement data will help you determine the targeted, annual sales figures for the current year.
Converting prospects to customers
Recording the number of enquiries you get each day or week and comparing this to the number of sales made in the same period provides your sales conversion rate and is useful in monitoring your targeted annual sales for the year. In a retail business for example, record the number of people who enter the store (prospects), and the number of sales made each day. Then calculate the percentage of sales to prospects. Record this figure and make it available to your team on a regular basis.
If you make a conscious effort to improve on the conversion factor each day, i.e., increasing the number of prospects who buy, it could significantly enhance the bottom line performance of your business.