Owning or running a business such as a supermarket or convenience store can get quite hectic. There are lots of things to consider each day, and with numbers moving all the time, it can be difficult to understand where or how to improve. Yes there are reports your point of sales system has available, but the difficulty lies in understanding the most relevant information in the time you have available to manage your future operations.
As mentioned in Part 1 of this blog series, the KPIs you plan to use should be tailored to ensure the goals of your business are met. In the list below, we have provided three further KPIs that will assist you in understanding and improving your business. Keep on the look out for Part 3 of this blog series to see the final KPIs we recommend.
4. Number of Sales
This metric may sound very simple – the number of sales transactions you complete in your store over a period of time – but it can provide a wealth of information to you and your management team on evaluating and optimising your staffing, marketing, inventory and customer service offering.
For a specific example of how this can be of benefit for you to track, look no further than the hourly sales report you can extract from your POS system. By viewing the trend of when sales occur, you can infer just how busy your store is at each time-block within a day. This may helps you to make better decisions on the number of staff and seniority level of staff you roster on at any given time.
5. Average Basket Value
Average basket value is a good metric to understand how your customers are spending in the business and can give insights on the types and number of items being purchased. For example, if your business has an average basket value of $110, but on average you stock low-value items, this indicates customers are purchasing larger amounts of stock, they could potentially completing their weekly grocery shopping.
The metric is calculated by dividing the total revenue of your business by the number of transactions that occurred in the same time period.
By using this metric, you should be able to learn more about your in-store marketing efforts; a low average value may mean customers are only coming in for the convenience and missing the opportunity of upsells, product bundles or selling a higher quality product of the same type. As this is a metric that you can track and implement change with your staff relatively quickly, it should be reviewed on a weekly or monthly basis.
6. Profit Margin
Profit margin indicates how much money is going in to your business. It is the main measure of profitability – a ratio of gross profit divided by total revenue, shown as a percentage. It tells you how much revenue is earned after the deduction for costs of goods sold.
You could be making large numbers of sales, but if the direct cost of those sales is almost as much as you are selling the product, then a lot of effort is being put in for minimal financial gain.
For example, a service station sells bottles of soft drink for $3.50 for a 600ml bottle. Each of those bottles may cost $0.80 each from the supplier. This gives the product a profit margin of (3.50 – 0.80) / 3.50 x 100 = ~77%.
Profit margin should help you identify what efficiencies need to be undertaken in your business. It could mean you need to negotiate with the supplier to lower the costs of purchasing stock, it may mean you need to increase prices to cover your overheads, or it might uncover that your overheads require efficiency gains to remain profitable.
If you have any questions, or would like to learn other tactics to gain a deeper understanding of your business, please contact us today.