Small Businesses try out various marketing tactics in order to grow sales as much as possible. However, unless you measure the impact of your efforts, it’s difficult to know what’s working and what isn’t.
That’s where sales metrics come in.
Sales metrics tell you exactly how your efforts are doing, where you can spend more and which areas need to be improved. It provides immediate feedback that you can use to refine your future marketing campaigns. Once you start monitoring sales metrics regularly, you can steadily improve sales and grow your business faster.
Here are 5 sales metrics that every small business can start tracking regularly:
1. Sales Growth Over Time
Looking at how sales has grown over time is an amazing way to understand where your businesses is headed. You can begin by tracking weekly or monthly sales numbers. This will help you set sales targets and measure your performance against them. Once you’ve gathered sales numbers for a reasonable amount of time, you can compare your current sales with previous periods. It can be previous week, month, quarter or year.
You can even plot historical trends of weekly/monthly sales for the past few months or years. Monitoring sales over time will allow you to spot seasonality, if any, in customer behavior. Accordingly, you can ramp up resources to fulfill the surge in demand. It will also reveal key trends such as additional sales due to new product launches, new pricing, etc.
If your sales are growing, you can note the steps that caused it and repeat them in future. If they aren’t, you’ll know it immediately so that you can find the source & fix it as soon as possible. This brings us to the next metric.
2. Sales by Product or Service
When your sales grows or falls, it’s necessary to find out what’s causing the change. Monitoring sales by each product or service tells you what’s selling and what isn’t. It allows you to focus more on promoting the best-selling products and improve the less-selling ones.
Tracking product sales over time gives a good idea about market events and enables you to respond quickly. For example, declining sales might indicate a new competitor in the market. On the other hand, a rise in sales may be due to a competitor’s exit, so you may need to increase the inventory to handle the additional demand.
3. Sales by Lead Source
Every business uses multiple marketing channels to grow sales. It’s important to know which channels are doing well for your business so you can spend more on lead generation sources that work. Monitoring sales generated by each lead source tells you which ones are working for your business. When you compare them with the associated marketing costs for each channel or source, you can find out the most profitable channels and optimize lead generation for your business. Over time, if any of your lead sources slow down, you can quickly identify & fix them.
4. Average Purchase Value
Average Purchase value is the average revenue per sale. It enables you to quantify each lead and assign marketing resources accordingly. You can even track it for each lead source to better forecast sales, manage inventory and budget marketing expenses.
You can segment your customers based on their average purchase values, into low, medium and high value customers, find out which products they purchase and through which lead generation channels they became your customers. This will give you a clear idea about your target market, customer behavior and preferences.
5. New vs Returning Customers
This metric tells you what percent of your sales is coming from new customers compared to that generated due to repeat business. To grow fast, your business needs to a have healthy mix of both. A good flow of new customers indicates that your marketing efforts are producing the desired effect. It makes up for the revenue loss caused due to some of your existing customers dropping off. If your business attracts only a few new customers then you need to focus on gaining traction, improving marketing message and increasing awareness about your business.
A strong number of returning customers indicates that your product or service is still valuable to them, and that your past offerings are in line with their requirements. Too few repeat customers indicates a high churn. It can be due to various factors – customers are not happy with your product, it’s missing some features, they find it too expensive, availability of alternatives, etc. In this case you need to focus on improving your product or service.
You can create a simple sales dashboard to start monitoring the above metrics regularly and share it with your team every week or month. This will allow you to closely measure sales performance and do course correction before it’s too late. As you feel the need to monitor more information, you can always add more metrics and charts to it.
It takes a lot of hard work and persistence to grow sales for your business. A lot of it involves reaching out to your target customers, spreading the word and trying out various marketing ideas. However, tracking these sales metrics will tell you what’s working so you can repeat it and improve faster. It will also tell you what isn’t working so you can fix it quickly. This will motivate you to fine-tune your marketing efforts, achieve your sales targets and grow your business.