For small business owners, sales metrics are vital for tracking performance, projecting revenue and measuring overall progress. The number of available metrics can be dizzying, gauging everything from sales rep performance — calls, repeat calls, conversions, closed deals and more — to the overall financial health of a business.
With so many possibilities, which crucial sales metrics are a must for small businesses to track?
As Forbes points out, everyone is happy when sales revenue is up. But understanding trends and deeper meanings of the data is critical to continued success. Sales revenue is made up of income from goods and services less some costs — like merchandise that is returned or that cannot be delivered.
Knowing whether sales are up or down is indeed important. But understanding the correlations to numerous other factors — like the costs of ad campaigns, seasonal variations, actions by competitors and others — provides you with the best chance for keeping sales high in the future.
Sales to returning versus new customers
Healthy businesses have loyal customers returning time and again for repeat purchases, as Entrepreneur magazine notes. But they also have a constant stream of new customers. Measuring sales from both groups provides knowledge about which of your sales tactics — such as sending out automated emails — is providing you with the best return.
Retention and loyalty of customers
Forbes advises that to understand how loyal your customers are to your small business, you’ll need to measure using three primary tools: feedback at the point of purchase, customer surveys and purchase analysis.
Attracting the correct target customer for your business and getting them to buy from you — rather than from competitors — are just the first two steps in building customer loyalty. You’ll also need to persuade these customers to buy from you often and in higher quantities and to refer other customers to you.
Cost to acquire customers
It’s important to understand the total cost of gaining a new customer — including the various components of your marketing and sales programs. To calculate this number, divide your total acquisition expenses by the number of new customers within a specific time period. This number should decrease with time as your brand recognition and the size of your business increase.
Revenue per sale
One way to increase your revenue is by attracting more customers. Another — and, sometimes, much easier — way is to increase the amount of each sale. Entrepreneur notes that McDonald’s doubled profits when staff began asking if customers wanted fries with their orders. The lesson applies to most types of businesses: Tap loyal customers for additional sales.
Sales by product category
Knowing what sells and what doesn’t in your business is critical. With this valuable information, you can place more emphasis on moving your popular items or services and expend fewer resources on those that don’t sell as well. Over time, you can use this information to glean when it might be time to roll out new versions of specific products. You also can use the data to assist in forecasting demand and keeping inventory at the right levels.
For small business success, track the right metrics
Most entrepreneurs understand very well how to create a compelling product and how to build an initial customer base. Maintaining success over time and taking a business to the next level can present multiple challenges, however. By identifying, consistently tracking and analyzing these six sales metrics, you gain valuable knowledge that will keep your business on the road to long-term success.