Each and every move you make as a small business owner should be measured using the the most relevant possible metric. How else will you know if you’re efforts are really making a difference?
This could be sales figures, transaction volume, sales by hour, items by hour, sales by employee, foot traffic, positive yelp reviews, negative yelp reviews, email addresses collected or, frankly, a hundred other measurements.
The important thing is that the yardstick you choose be the best and most appropriate unit of measurement to assess the success of your new initiative.
As a brief guide, here are a few useful metrics that all local entrepeneurs should be tracking when experimenting with their business.
1. Overall Sales by Hour
As store owners we can all make intuitive guesses about roughly when our businesses are most busy. However, having concrete numbers lets us make more informed and intelligent decisions about critical things like opening hours and staffing levels.
For example, if you are seeing dramatically higher sales towards the very end of your business day, it is worth experimenting with staying open longer. If you are seeing a huge lunchtime peak, it might be time to think about adding people during the rush. Getting these kinds of decisions correct is fundamental to your business.
2. Item Sales by Hour
We all know that coffee is a big seller in the morning. But what should you be asking your cashiers to cross-sell? Which treat should be prominently displayed next to the register? Muffins or Croissants? Cookies or Brownies? Donuts or…well, you get the point.
Learning which items are selling at different times of day can help inform your inventory management, your promotional plans and even what time of day you turn the slush puppy machine on!
3. Sales by Employee
It’s crucial that you understand how your employees are performing so you can train and reward them as appropriate. This is particularly important if your business hires skilled or semi-skilled staff, such as at hair and nail salons.
I think we’ve all seen how a skilled, knowledgeable and confident sales person can make a big difference in convincing customers to purchase more of your better margin products. Thus, identifying this employee isn’t just important in terms of rewarding his/her efforts and improving your bottom line, it’s a great opportunity to share ‘best practices’ with the rest of your team.
4. Tracking your Margins
From behind the counter it’s all too easy to mistake a busy day for a great business day but just because something is selling like hotcakes doesn’t mean that it’s really growing your bottom line.
If only we could all sell nothing but cosmetics or movie theater popcorn, we’d all sleep more soundly at night. Sadly, most retailers have to deal with a product line where the margins range down from the reasonable to the superslim. That’s why it’s really important to track your margins and ensure that you are doing what you can to increase sales of high-margin items.
5. Track Your Most Frequent/Important Customers
It is crucial to identify and reward the core group of repeat customers that are disproportionately contributing to your revenue. You can do this by collecting emails using a modern point of sale system. Loyalty cards are a simple way or rewarding this group.
Not only should you track how much this group spends but also look at which products they buy. Understanding what your core target audience wants can really help you streamline your product offering.
This article is an excerpt from Lean Retail 101, the definitive guide to running your small business like a fast-moving, data-led startup. If you’d like to learn more you can sign up to read this guide below.