Other ways to look at your sales data...

Last week's blog about how to figure out how your business is doing got me thinking about other ways to track data and I came up with this idea...

How about amount of sales per employee? I don't mean specific employee by name. I mean divide your sales for any given month by the number of employees you have that month.

For example: Let's say your sales in December 2006 were $20,000 and you had 10 employees that month. $20,000 divided by 10 is $2,000 per employee.

Why might this be interesting? Well, let's say that in December 2005 your sales were $18,000 but you had 8 employees and in December 2004 your sales were $16,000 and you had 5 employees. Your sales each year has gone up and so has the number of people you have employed.

So for those three years, your sales per employee were:
Dec 2004: $3,200 / employee
Dec 2005: $2,250 / employee
Dec 2006: $2,000 /employee

On one level, business is good - sales went up each year in December. But your sales per employee has gone down - way down. Given the increase in employees, your payroll has gone up which means any profit will have gone down. So the question is: Are having more employees worth it? If I had a metric that had this kind of trend, I'd start to wonder about the effectiveness of my employees. Why aren't they able to keep up the $ per employee? Do they need more training? Is having more employees making them prone to "someone-else-can-do-it" syndrome?

This is just one metric to think about if you're wondering why your sales are increasing, but your profit is not. There might be a correlation, there might not - it's just one thing to think about. Go ahead and try it. (Other calculations you could do: sales per thousand dollars of payroll; sales per hour the business is open; sales per # of hours of payroll, etc)

Have fun!

How you doin'?

How's business?

If you're in business for yourself, you've been asked this once, twice... okay anytime anyone who knows you sees you this is probably the first question they ask.

I always answer "fine" or "good" or something else pleasant and upbeat - any other answer isn't all that appropriate for the masses IMHO.

But can you answer this question objectively for yourself? And how do you really know how you're doing? One way (but not the only way) to do that is to compare ourselves to everyone else.

There's a fantastic website, bizstats.com, that has taken data from many (sole-proprietorship) businesses and compiled it in a useful way for the rest of us. Go ahead and click on your industry and type in your gross sales from last year. You'll get a fantastic indication of what your expenses and net income should be based on everyone else.

The other neat thing to check, especially if you're a retail business, is the Sales Per Square Foot (SPSF) section. This is one interesting retail benchmark. Unfortunately, it's not necessarily helpful beyond giving a warm fuzzy. For example, the only stores I can really compare my paint your own pottery business to are the listings for Jo-Ann, Hancock and Michael's (arts and crafts businesses). Note that the SPSF range from $75 to $204 for these 3 businesses. That's a pretty large range. The SPSF for my business happens to be somewhere in the middle.

So what can I take away from that...? If my SPSF was under $75, things wouldn't be good and I'd be worried. If it was over $204, things would be wildly fantastic. It's really just a point of interest beyond that. Since I have a single retail location, I'm comparing my number to these other businesses. If I believed that my current number is acceptable for my single location, and was planning to open a second store, I'd set this SPSF as a goal. Make sense?

So take a look at your numbers and answer these questions for yourself... what's you're sales per square foot for each year you've been in business? What about each month? If you have multiple locations, how do they compare with each other? If you're not open yet, based on these numbers, can you set a goal for yourself?

Have fun!