When growing their companies, small business owners need to create sales targets and forecasts based on their objectives. Whether owners want to expand outside their local market or territories or aim to increase their customer base, they should establish metrics and benchmarks to determine their overall progress in meeting these goals.
Here are five small business sales metrics to track and why:
1. Cost of Customer Acquisition
With their limited resources, small businesses should be careful about how much they spend to generate leads and convert customers. Company heads often track the cost of customer acquisition in relation to their marketing and sales expenses.
- Definition: Customer acquisition cost is the total cost of obtaining a new customer depending on marketing, sales and other expenditures, according to Forbes.
- How to calculate: Divide all acquisition costs by the total number of new customers obtained during a given period.
- Why track: Measure marketing and sales effectiveness. Think about cost of customer acquisition as a measure of how well marketing and sales campaigns are working. If customer acquisition costs are high and there is not much return then companies should reevaluate their marketing and sales initiatives and adjust them to better target leads.
2. Average Revenue Per Sale
As businesses expand, they will need to increase their profits to keep up with growth in new markets, invest in new product development or other functions.
- Definition: A significant metric to monitor when tracking their efforts to become more profitable, average revenue per sale gives business owners a quick overview of their sales performance over the length of a quarter, year or other time.
- How to calculate: Divide total revenue by the number of sales in a set time.
- Why track: Improve sales forecasts and calculate profitability. Average revenue per sale can give a good snapshot of how much profit a company is making per transaction so owners can modify their strategy.
3. Conversion Percentage
Turning leads into new customers is essential for any business, but doing it efficiently and on a restricted budget is the challenge.
- Definition: Conversion percentage indicates whether marketing and sales efforts actually result in the customer converting, or also known as performing an action that is necessary to achieve the company's goals, such as purchasing an item.
- How to calculate: Divide the number of purchases by the number of visitors, and then multiply this number by 100, according to point-of-sale firm Bindo POS.
- Why track: Optimize campaigns and sales resources. Bindo POS recommended using conversion percentage as a way to better influence customers to increase their chances of converting.
4. New Versus Returning Customers
While business owners have had success acquiring consumers in the past and retained much of this customer base over the years, adding new customers is also critical.
- Definition: New versus returning customers is a metric that measures the percentage of sales generated from new or returning customers, according to Business2Community.
- How to calculate: A Google Analytics or other analytics software should measure the number of visits, purchases or conversions based on new or old customers.
- Why track: Figure out what's attractive to new or loyal customers. Overseeing the number of new or returning will help business owners see what is the best approach to continue their sales gains among these crucial groups.
5. Social Media Engagement
In a world where the globe is connected through the Internet, it's hard for a business to stand out without a solid social media page. Through looking at metrics related to engagement, a company can grow customer relationships.
- Definition: Engagement means several different things, including social shares is the number of likes, retweets or other measures of activity on social networks, Moz noted.
- How to calculate: Use an analytics platform to record and report likes, conversations, number of followers and other metrics.
- Why track: Enhance the company's social media presence. If a company is not getting as many shares as their competitors, owners should change up their social media strategy.