Get on top of your numbers: how savvy business owners leverage their figures to get results

Metrics matter- and if you don’t track them, how can you be sure your business is a success?

Traditionally in retail, product is king, but numbers are what matter the most in your retail business. After all, it’s no good having the best products if you don’t know what’s selling, what isn’t, and what your overheads are. In short, if you’re not on top of your numbers, your business will unravel, and fast.

So don’t be afraid to dive in to the nitty-gritty; the key to success is managing your metrics and making the process as simple as possible. Here is my three-step guide to doing just that.

First, identify what matters to you and your business; if you really want to create success, you have to know which questions to ask, and then gather the relevant data to guide your decision-making process.

Here are some examples to get you started:

• Are you meeting your goals?  

• Are you achieving your planned financial targets?  

• Are you focusing on the right products?  

• Are your cost prices too high?  

• Do you need to adjust your selling prices?  

• Are your marketing initiatives paying dividends?  

Second, once you know what you need to know, you can start tracking the data, and this does not need to be complicated or overwhelming; just pull together a simple system that you can update and understand.

KPIs, or Key Performance Indicators, enable you to gauge your business success, and here are the top 10 you should track:

1. Gross profit (sales – cost of goods sold) and net profit (gross profit – operating expenses – tax) are numbers you should calculate every week so that you can plan your cash flow. 
2. Average transaction value – knowing how much each transaction is worth to your business helps you understand how your customers are interacting with your products. For example, are they spending less now than a year ago?  Is your product strategy working, or should you be offering an upsell?
3. Average basket size – similar to the ATV, the average basket size tells you how many items you customers are buying, and what this means for your business performance.  It helps you assess your marketing and sales efforts, as well as understand your customers’ needs.  
4. Year-on-year growth – you should always know where your business stands vs last year, so that you can assess your marketing initiatives, products and sales strategies. If you aren’t seeing the numbers you want, make changes now.
5. Stock turn – dead stock can ruin a business, so you should always know which products have been sitting in your warehouse for longer than planned.  Sell them at a discount or give them away as part of a promotion, but don’t let excess inventory cost you more money in storage than is necessary.
6. Sell through – this tells you how efficiently your business is able to sell inventory, and therefore how often you need to reorder, allowing you to plan and budget.  The faster you can sell through stock, the more cash your business will generate and the more creative you can be with your product offering. 
7. GMROI, or Gross Margin Return on Investment, gives you an idea of how much profit you are making from your investment in inventory. Stock is one of the main expenditures for any retail business, so if you want to know how yours is performing by line, category or department, use this formula:  GMROI = Gross Margin / Average Inventory Cost. Once you’ve done your calculations, you can improve your inventory management and buying decisions, ie if a SKU has a low GMROI, you may want to consider discontinuing it. 
8. Conversion rate – how many customers are visiting your store or website, and how many of them are buying?  This is a key metric that can help you understand your customer journey better, or empower you to make changes to your marketing or products strategies.
9. Browsing time – how much time do your customers spend browsing in store or on your website?  Are they enjoying the experience you’re creating, or leaving within a short period of time?  Research shows that the longer a customer browses, the more invested they become in your brand and the more likely they are to hit buy.
10. Footfall and online traffic – are your marketing initiatives paying dividends by attracting customers to your store?  If you aren’t getting eyeballs on your business, you can’t meet your sales targets, so make sure that you know which channels are sending customers your way.

There are many more KPIs that you could be tracking, but these are some of the most important for any retailer, regardless of size.  In an industry that is under an increasing amount of pressure, you can’t afford to ignore these data points, so get started today with tracking your KPIs.

Third, once you have the data to answer your questions, use the numbers to guide your decisions. Ensure that you always refer back to what the numbers are telling you, even if that means making some uncomfortable decisions.

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A post shared by Hina Amlani | Retail Collaborative (@retailcollaborative)

If you need more help or guidance, get in touch to see how I can help your business achieve its potential.