Every business owner needs reliable figures to regularly check on business performance.
A valuable set of measurement data to collect is your annual customer numbers, average sales, number of customer visits and so on. Using these figures as a baseline you can then set realistic targets towards increasing profitability and continue to monitor the business’ performance on say, a monthly basis.
In a retail store, for example, (although the exercise is appropriate for other businesses also), 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.
How to Increase?
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.
Prospects Conversion to Customers
Retailers should also record the number of people who enter their store – the prospects – and calculate the number of sales they make 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 everyone makes a conscious effort to improve on the conversion factor each day, i.e., increasing the number of prospects who make sales, it could significantly enhance the bottom line performance of your business.