This article was written by Barry McKinley, SCORE Orange County Business Mentor
Business owners and managers sometimes are so busy building sales, they miss the most obvious. The saying “Can’t see the forest for the trees” becomes very fitting. To understand and grow your business profitably you need to have a very good understanding of what makes your business tick. Following are ten areas you want to review regularly.
1. TOTAL SALES BY PERIOD - Track your business revenue on a calendar basis, monthly, weekly and daily. This is your score card on how you are currently doing; two months later could be too late.
2. SALES BY PRODUCT/SERVICE – What is selling and what is not? You may be able to increase inventories in certain areas to eliminate “out-of-stock” and turn slow moving inventory into cash. It is important to understand what you should be promoting and where to spend your advertising dollars.
3. SALES BY LEAD SOURCE – Know where your marketing dollars are producing the most activity and profit. Just because a particular campaign was effective a year ago doesn’t mean that it is working today.
4. REVENUE PER SALE – Increase sales without increasing your client base. McDonalds doubled profits when they started asking, “Would you like fries with that?” and then again doubled when asking, “Would you like to supersize that?”
5. NEW vs RETURNING CLIENTS– How many new clients are you adding? In a normal business cycle a company will lose anywhere from 20% - 33% of their clients yearly. This means in many cases your business is not growing because you are not adding enough new clients
6. TOP 20 CUSTOMERS – Who are they and is their business growing or declining?
7. SALES PER PRIOR ACTIVITY – How effective is your advertising and other sales promotions? Measure cost vs. outcome.
8. PROFIT PER ITEM – What products are giving you a good return and what aren’t.? Does it make good business sense to continue to carry the low profit items?
9. WEB ACTIVITY – What is the activity on your web site, how many hits, how long are they staying, how many pages are they reviewing, what is the % of loaded carts not checked out?
10. SPECIAL REQUESTS / COMPLAINTS – Are you missing sales because you are not carrying products your clients want? Is your business polices creating lost revenue?
By analyzing each of these potential profit centers for your business you will find how easy it is to increase sales and profits while decreasing inventory, outdated polices and non-productive employees.