5 Most Important Sale Metrics You Must Know When Running A Business

5 Most Important Sale Metrics You Must Know When Running A Business

Are you measuring your business’s performance?

If not, how do you know if things are improving, or going downhill?

And if you are, what do you measure?

For a business to succeed, it’s important to track your work, sales, and financial figures. The best way to do this is look at specific and relevant sales metrics or KPIs (key performance indicators) that will show you how your business is actually performing over a set period, and where it’s not.

But there are hundreds of different sales metrics you can track, and nobody has time to measure all of them — plus, you don’t need to. Different businesses will need to track different metrics, but there are certain ones that will be important across all businesses.

Irrelevant metric will only distract you from the key things that matter within your business, and keep you stressing over numbers that don’t really matter. This is why it’s important you choose the right sales metrics to track.

Why monitor these?

Sales are the backbone of your business. Without them, you don’t have a business. Sales and revenue are also a great way to motivate yourself and your entire team during the good times and the bad.

Tracking sales metrics will increase performance, improve accountability, and help you to optimise the sales activities you conduct as a business. This will give you and your team focus and clarity, so you can hone in on what you do best; doubling down on what’s working, and letting go of what’s not.

The 5 most important sale metrics you must know:

  1. Sales revenue

 

 

Sales refer to the income you receive from goods and services purchased by a customer, minus things like returns.

When looking at your sales revenue from month to month, you’ll get a good idea of if people are interested in buying your products or services, if your marketing tactics are working, if you’re still in the race with your competition, and more.

It’s important to take into account any recent changes in the market, price changes, or previous marketing campaigns when tracking the sales revenue, as these are some of the many factors that can affect your results.

You can measure your sales revenue by adding up all the income received from customer purchases and taking away any returned or undeliverable products.

To grow your sales revenue, you need to focus your effort on increasing your number of sales. You can do this by putting more money into marketing, hiring sales assistants, or shifting your direction to meet the market’s needs.

  1. Customer Acquisition Cost (CAC)

This is how much it costs you as a business to acquire a new customer. To calculate this, you can take a set time period, and then divide your cost of marketing and sales, by the number of customers you gained during that time.

E.g, you spent $500 to get 5 customers. Your CAC = $100

The lower your CAC, the better, but this will depend on the nature of your business, and the price of the goods or services you’re selling. The cheaper your product, the lower this figure should be, in order to make sure you’re still turning a healthy profit.

If you notice your CAC is steadily rising, and you haven’t increased the margins on your offerings, this could be a dangerous sign. But it’s important to evaluate this metric with many other metrics that will give you a clear picture.

  1. Margin

Your gross margin is your total sales revenue, minus the cost of goods sold, divided by the total sales revenue. This figure will be a percentage. The higher the percentage, the more money you’re enjoying as a profit on the products and services you’re selling.

As your business grows, increased volumes of output should improve efficiency, and therefore lower the cost per unit, while increasing the margin. When improving productivity within your business, it’s important to track your margins carefully, so you can see that they’re improving and not going the other way.

If your current revenue doesn’t exceed your cost of goods sold, combined with your operating expenses, you shouldn’t be thinking about hiring anyone new. Make do with the resources you have right now, then think about expanding once things are steady.

  1. Retention rate

This is the percentage of customers who stay with you and leave over a set period. This is especially relevant for businesses who run a subscription-based model, although it remains valuable for all other businesses too.

You can work out the retention percentage by subtracting the number of new customers from your total customers and dividing that by the number of customers you began the period in question with.

Your goal is to keep as high a retention rate as possible, by ensuring you’re not just focused on acquiring new customers, but also with providing a great service or product from beginning to end.

As they say, it’s much easier to sell to existing clients than new ones, so once they’re through the door you want to try to keep them there.

  1. Sales Growth

Every company wants to see their revenue grow month after month. But sometimes sales fluctuate depending on seasons, the general market, and the mood of customers.

Keeping track of this month to month is a great way to keep on top of things in the short term, while sales growth year-to-date will show an overall pace at which your sales revenue is increasing or decreasing, taking into account these fluctuations.

As you can see, it’s important to monitor your sales growth over various stretches of time to grasp a full understanding of where your business is at, and the direction it’s headed in.

You might have a goal to see an increase in sales growth each month — even if it’s by a small percentage — or at the very least maintain the same level of steady sales.

Sales growth can be increased by investing more resources into your marketing and sales efforts, or by receiving positive media coverage or public customer feedback.

Always be tracking!

Whether your business is a one-man band right now, or you run a team of employees, it’s crucial to decide which sales metrics are most important for your business and where you want to grow; then track them consistently. The above metrics are a great place to start, but you’ll probably want to add a few to track alongside these.

2018-11-19T23:03:57+00:00 November 19th, 2018|Blog|0 Comments

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