Most independent business owners decide whether they are successful or not by simply seeing if there is more money in their jeans at the end of the month or not. Or they wait for their accountant to report what type of year they had. Or they go by the "feeling" they have at the end of a month. It doesn't have to be guesswork. Reports of various kinds can help you see in real time how well your business is running, where you should grow and what proactive steps can be used to avert disaster.
1) Year over year sales. While obvious, this is necessary not just to look at this year compared to last, but also the previous three years. Is there a trend to your business growth?
2) Customer counts. Most POS systems can do this report easily for you. If not, simply tally the number of transactions you had for the month. Comparing this to previous years helps identify whether you are truly growing your base.
3) Average order amount. Your POS system can do this as well. If not, simply divide your monthly gross by your customer count. Comparing this to previous months and years helps identify if your crew is upselling. A business can only grow incrementally unless customers leave with more than one item.
4) Turnover. Have trouble with people quitting on you? Always hiring? Take your monthly schedule and divide the number of W-2s you sent out with the number of shifts on your typical schedule. For example, if you have only 4 employees including full and part-time and you sent 12 W-2's in January you would have a 300% turn. It could be a symptom of poor management resulting in employees voting with their feet. Look at your management style to cut turnover. My way or the highway ended with crew cuts.
5) Mystery shops. While we always take care of our regulars, they'll more than likely always return because they have a relationship with you. The important test is how well new customers are treated. An independent mystery shopping service can anonymously give you feedback. While a shop is only a moment in time, after several on an ongoing basis, a clear picture emerges. Decide what your standards are - everyone is greeted within 15 seconds for example- and build your scorecard with it. Use it to reward good actions more than punish.
6) Category sales. The big trend in retail now is additional services that can contribute to the bottom line. By having, say a dozen categories, you can quickly analyze where the true growth in your business is coming from. Then add to those product categories while reducing less-performing ones.
7) Employee individual sales as a % of monthly sales. Not everyone can sell well and sales figures don't lie. Low sales are often a great indicator of interest in your business. Everyone can have an off month but if there is a pattern, you can intervene before a disgruntled employee ruins you. My philosophy: when the mind goes, the body should follow. Do employee reviews on all of your employees in February and July.
The most sophisticated POS systems can be setup to automatically to email most of these reports to you on the first of each month. That way you can't forget or procrastinate. Put the reports in a 3-ring binder after you have reviewed them or entered their information into a spreadsheet.
By reviewing each of these seven indicators, you can continually work to have a well-running business.
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