Starting a business can be a nerve-wracking decision. Every business owner can endorse that they put their all into making their business successful. Every company decides on its unique success factors that indicate the business’s health. Some common factors are churn rate, the number of new leads acquired, and sales growth.
Several techniques have been derived that can measure a business’ growth and keep track of its performance. These ratios are easy to use and easy to monitor. They are also increasingly being used by businesses to keep a check on their progress.
Gross Profit Margin
The ratio of Gross Profit divided by Revenue is called Gross Margin. The gross margin might not be applicable for businesses that do not sell physical products. However, for those that do, gross margin can be a great area to focus on for improvement. Improving the gross margin enhances the performance of the business. The first obvious way to improve the gross margin is by raising the selling prices of products. However, other ways to improve the gross margin include:
- Implementing ways to recycle and reuse waste materials and urging employees to do the same
- Looking for areas where there is unnecessary waste created and reducing it by limiting buying to only what is needed
- Using cost materials that are more affordable (without compromising on quality) results in reduced costs of goods sold
- Discussing pricing with suppliers and re-negotiating a more favorable deal
Revenue Growth
A healthy company shows steady growth in its revenue. One way to increase revenue is by procuring more leads. This can be achieved effectively by devising a robust marketing plan, running ads to generate warm leads, and then integrating Customer Relation Management (CRM) software with the lead generation platform to automate and reinforce the sales process. CRM makes it easier to nurture and target those people interested in a business’s products or services. A CRM software can also be used to generate leads, as well as manage content to keep prospective leads interested.
Other than CRM software, constantly looking for upgrades to existing products or services or developing new products or services that a business’ customers would need is important to not only improve customer retention but also help attract new customers. In fact, attracting new customers is important to improving revenue growth. This can be done by developing a solid marketing plan to identify new customer bases and ways to sell to them. These ways can scale, meaning a business can expand its customer base by seeking out new marketing channels.
Average Revenue Per Customer
If a business sells more than one service or product, the goal would be to entice every customer to buy more products or services at the same time. For instance, an online business can design its website in such a way that a visiting customer sees as many products or services as possible. Not only that but the design and layout of the website can further help tempt customers to purchase more items rather than one.
Customers often see something along the lines of “you may also like this” when visiting a business’ website. This is a proven way of encouraging customers to spend more. Businesses can use sales data to determine what customers are buying and other products or services they might like next. Returning customers offer more data through their buying habits, and better guesses can be made on what could encourage them to contribute to increasing the business’ average revenue. Loyal returning customers can have special offers sent especially to them for items or services that they would be interested in buying. It is these loyal returning customers that contribute majorly to sales.
Apart from special offers, one popular method to get customers to buy more than what they came for is bundling products and/or services. Deals, such as packages, upsells, and discounts on yearly subscriptions considerably boost sales.
Average Revenue Per Employee
A lot of factors affect the revenue generated per employee. Sometimes bad revenue can be caused by the business itself if its systems or processes are not efficient enough. Automation is another factor that affects revenue per employee. Businesses that sell per hour are most likely to be affected by the revenue per employee.
Some ways to grow revenue per employee are:
- Simply ensuring employees have the means to do better. This means equipping them with the training and equipment they need to do their job well.
- Keeping employees in the loop about the performance of the business. This instills in them a sense of responsibility for the business’s success, which can encourage them to try harder for the business’ success.
- Encouraging employees to set goals and setting a method of regular checking on their progress to achieving these goals
- Keeping sales data transparent. It is a healthier practice to keep everyone aware and in the loop about everyone’s progress. This creates healthy competition and makes everyone feel included and important. This feeling encourages them to give their best.
If a business wishes to track its financial progress or assess its financial position, it is essential to avail of bookkeeping services in Irving or bookkeeping services in Coppell. Developing and maintaining accounting records can be a tedious task with a lot of margin for error. Accepting the help of professionals can take the burden of keeping track of all the business’s financial transactions off. The bookkeepers also conveniently summarize the business activities in financial reports.
Bookkeeping services are wide and varied. It can be for any type of business entity. For instance, property management bookkeeping in Irving or property management bookkeeping in Coppell is a popular service people avail to manage their businesses better. As a business grows and its finances become more complicated, it may be wiser to subscribe to these services.
