Successful business owners acknowledge the importance of knowing the key numbers in their business. This doesn’t just mean their P&L or the bank balance (although these are obviously important). There are some numbers which will help you to understand where you are now – and most importantly, help you to set goals towards building a fantastic, profitable business.
So – here are my first 7! Why not think about what these numbers are in your business? Download the worksheet at the end and have a go!
1. How many customers do you have?
· What is a “customer” – it should be something more than just someone you invoiced in 2018? How long do you keep them? When was the last time you communicated with them? How easy is it for them to use someone else?
2. What’s your top selling product or service
· In £ (turnover) – what is your top selling product. What time frame is relevant for your business – monthly sales – quarterly? Is your business seasonal – in which case you need to choose the correct time frame. What proportion of your total turnover does this product represent?
3. How often do customers buy from you?
· Do your customers purchase (on average) on a daily, weekly or monthly basis – or is it ad-hoc? Think about this in terms of the number of days between purchases – e.g 30 for monthly purchases
4. What’s the average value of a “sale”?
· What’s the average invoice value / transaction value in ££. How easy is it for you to calculate that – what time period is relevant? Choose the latest quarter as an example – divide total sales by number of invoices raised
5. What’s your most profitable product or service
· Can you calculate gross profit for each of your products? Again, choose a time period that is relevant to your business – do you know the cost of purchasing each item? If you sell services – what is the cost of delivering them?
6. Who’s in your sales pipeline – how many leads and prospects?
· Do you maintain a list? Can you actually identify and differentiate between leads and prospects – who have you provided a quotation or proposal for? When should you be following up?
7. How long does it take you to close a sale?
· How many days/weeks/months between initial contact (for a new customer) and getting the order or delivering the product (on average)?
Bonus question: Why do you need to know this?
· It makes it easier to Identify your ideal customer if you know what your current “best” customer looks like – also think about what other attributes might be relevant? Industry / size of business
· Make sure you are selling only profitable products – it often comes a surprise to businesses that their top seller is not the most profitable. Did this work for you – were you surprised by the result of Q5? Was it the same product(s) as you had identified in Q2?
· How much do you need in your sales pipeline? In order to forecast accurately you need to know when new sales are going to be coming in? If your sales cycle is 6 months and you find a new customer tomorrow then it will be (on average) 6 months before the revenue comes in, and if you offer credit terms, even longer.
Can you easily identify all these numbers in your business? Download the worksheet and complete it. Then set yourself some targets to grow your business.
If you’d like to work with me on this then Get in Touch!