Tracking These 6 Metrics Could Boost Your Sales
"How can I increase my sales?" This is perhaps the most common question entrepreneurs and business owners ask. I typically respond by asking about their sales metrics. For example, their average revenue per sale.
Unfortunately, most entrepreneurs and business owners are unable to answer my simple questions. As a result, they can't increase their sales, because knowing your metrics is critical to sales growth. Once you know your metrics, you can methodically improve them. Sales subsequently skyrocket and your competition gets left in the dust.
Here are the six most important sales metrics you should track and improve on an ongoing basis:
1. Total sales by time period. The first metric to track is your sales on a calendar basis. For example, what are your sales month to date? Likewise, you may choose to track your sales by day or week. By tracking sales by time period, you know exactly how well you're performing. You know if your sales are up versus the prior period, be it the prior day, week, month, quarter or year. And if sales aren't up each period, you know you have work to do.
2. Sales by product or service. The next metric to assess is your sales by product or service. This tells you exactly what's selling and what's not. Armed with this information, the most effective and simple advice is to spend more time promoting what's already selling and less time on what isn't.
Tracking this metric over time is very important. Declines in the sales of certain products might mean new product versions are required. Conversely, an ongoing increase in a product's sales can help you forecast demand and make sure you maintain the appropriate inventory levels.
3. Sales by lead source. There's a famous quote by former department store owner John Wanamaker: "Half the money I spend on advertising is wasted; the trouble is I don't know which half."
The key here is to spend more on the advertising or "lead sources" that produce the most sales, and to stop wasting money on sources of leads that don't. By tracking the lead sources for your sales, you can optimize your lead generation. Also, when formerly good lead sources slow down, you can spot that immediately and fix the problem.
4. Revenue per sale. The easiest way to increase sales and profits for most companies is to increase the average revenue per sale. In fact, it's said that McDonald's doubled its profits when it started asking, "would you like fries with that"? And then doubled profits again when it asked, "would you like to supersize that?"
Each of these questions dramatically increase the average revenue per sale. And once again, if you don't track this metric, you can't possibly improve it over time.
5. New vs. returning customer sales. What percentage of your sales are coming from new customers versus returning customers? A healthy business has both: an ongoing supply of new customers, and old customers returning to buy more of your company's offerings.
Getting customers to buy from you again, and increasing customer lifetime value, can dramatically improve sales and profits. But you never know if your marketing tactics, such as emailing your customers, is working if you don't measure these results.
6. Sales per prior activity. The final sales metric to track is sales per prior activity. Prior activities are those events that occurred shortly before the sale. For example, I like to track sales per click or sales per impression when doing online advertising. You can also track sales per lead or sales per phone call.
This allows you to find the root of sales success or failure. For example, if sales decreased, you might find it was the results of a decrease in sales per phone call. By changing the script your phone staff uses, you might be able to immediately resolve this issue.
Most sales people say that sales is a numbers game. If you go to more events, speak to more prospects, issue more proposals, etc., you'll close more sales. That's true. Tracking the results of each of these efforts will allow you to see what's working so you can do more of it. You also identify what's not working, and can fix it right away. So, start tracking your sales metrics, and your sales should steadily start to climb.
Dave Lavinsky is the co-founder of Growthink, a Los Angeles-based consulting firm that helps entrepreneurs identify and pursue new opportunities, develop business plans, raise capital and build growth strategies. He is also the founder of Guiding Metrics, a company that tracks KPIs to help businesses grow faster and more profitably, and the author of Start at The End (Wiley, 2012).