The Key Numbers To Look At In Your Business
As a retail business owner, plotting the way forward can often seem like a maze of numbers. The seemingly endless maths exercises needed to manage the financial side of things effectively can take time, but they are essential to long-term development.
For this reason, it pays to identify the numbers which are most important, and understand how they can aid decision making:
What gets measured gets managed
Firstly, it is worth remembering, if things don’t get monitored and measured, then they don’t get managed effectively.
You must become efficient at keeping records in order to have accurate numbers at your disposal. This will help to easily improve things which are crucial to your business. Ensure you have the right reporting procedures in place.
This is your sales income, minus the direct cost of the product/service. If you sell a book for £10 that cost you £6, your gross margin is 60%. Gross margin is crucial as it shows whether your costs can be covered by your sales.
Labour ratios allow you to keep track of how much you pay out in wages, in relation to the sales that come in. Employment costs are one of the major operating expenses of a business. To maximise operating performance and overall profitability, every business owner or manager must be able to measure how effective he or she is in using labour to generate sales, and ensure a healthy balance.
L4L (Like-for-Like) sales growth
This is the level of sales you are bringing in versus the level over the same time period last year, to review how much your business has grown – an essential tool for measuring your development.
Net profit is the bottom-line profit (before tax) – this is what all the hard work is for: what you are left with after all costs have been deducted from sales income.
EBITDA – or Earnings Before Interest, Tax, Depreciation and Amortisation – is an approximate measure of a company’s operating cash flow. It’s a great way to compare the business’s performance to similar businesses without having to factor in different financing decisions, accounting decisions or tax environments.
Average spend per transaction
This equates to how much a typical customer spends on average. ‘Upselling’ can be used to increase this number, whereby a customer is enticed to buy additional products. The same goes for increasing selling prices.
Sales mix analysis
Do you sell more of one product than another? Does this change at different times of the day/week/month/year? Has it changed since this time last year? The numbers involved should all be part of your sales mix analysis, which could influence your stock management.
Away from the financials, there are also some other critical numbers which can inform your business strategy. These include:
• Staff retention
• Number of customer complaints
• Delivery accuracy
That’s an overview of the key numbers involved in the running of your retail business. They can allow you to take a holistic view of all your operational aspects, helping you to map out a successful future.
Virgate Accounts can help you to have a real grasp on your business finances. If you want to be confidently in control of the key numbers in your business then call us today on 01452 226111 or book your free no-obligation consultation today.