How do you know whether your eCommerce website is doing well? Do you just wait for quarterly profit and loss reviews instead of identifying top KPIs? Perhaps you have one eye on your inventory and one eye on your bank account.
The problem with an unfocused view of your business finances is that revenue might look good today but without detailed data, it can leave you flying blind. That’s why it’s so important to know exactly how your business is performing and the way to do that is to focus on facts and figures.
Facts and figures don’t lie. They show you where your business is doing well and where it needs improvement. To get a firm idea of how your business is performing, you will need to look closely at the data and hold them up against several KPIs or key performance indicators.
Key performance indicators are used to monitor a variety of things. In terms of business sales, they are used to ensure your data matches up with what your goals are. The great thing about using KPIs is that they are focused thereby ensuring you’re not relying on guesswork. Outlining your KPIs and using data to compare is a great way to stay on track and work efficiently towards your goals.
We will be covering some of the top financial KPIs to keep an eye on to ensure your long-term success. While KPIs can differ between industries, here are the top five which will help you grow your revenue.
KPI #1: Sales Growth
The top KPI that all businesses need to focus on is sales growth. Without sales growth, the business can at best start to stagnate or at worst struggle to keep afloat. That’s why sales growth is one of the most important KPIs to monitor.
Keeping a close eye on your sales figures and growth will keep your business on the right track. It will also help you flag any causes for concern before they grow into bigger problems.
To monitor your sales growth, you will need to do a few things, including:
- Track your sales – The first thing to do is note down all your sales from the period you’re analyzing.
- Calculate the sales growth – To see how much your sales have grown, you need to subtract the previous period’s revenue from your current period’s revenue. Ideally, your current period’s revenue will be greater which will show positive growth.
- Calculate growth as a percentage – To convert this to a percentage, you will need to divide the growth figure by the total of the last period’s revenue.
KPI #2: Revenue Concentration
In an ideal world, your revenue will come from multiple different sources. This is because relying too much on one income source is risky. If one client drops out or you lose a customer, your revenue can be greatly affected which can harm the business. Diversifying your revenue streams is a great way to ensure future growth and resilience against stumbling blocks like client loss.
That’s why one of the top KPIs to keep an eye on assess where your revenue is coming from. If you realize that the bulk of your revenue is coming from one customer, then that’s something you can work on.
To avoid relying too much on one source of revenue, you may want to start marketing to a broader audience and target different types of customers or just more of the same kind.
KPI #3: Income Sources
On a similar note to revenue concentration, it’s good to have a wide overview of where your income is coming from. Successful businesses regularly analyze their revenue streams, looking at revenue per client and per service.
This bird’s eye view of your income will reveal key pieces of information that you can use for future business decisions.
Monitoring income sources allows you to:
- Determine which products or services are the most popular/most valuable
- See which type of customers are the biggest revenue drivers
- See whether your revenue concentration is diverse or not
- Make crucial business decisions with up to date information. For example, if you know product A sells a lot, you may want to use it more in marketing materials.
KPI #4: Product Performance
The sales performance of specific products or services is another one of the essential KPIs to keep track of. As a business owner, watching what products or services perform the best and which are not performing as expected is so important. This information can help you determine which items to focus on in your business.
For example, you may wish to increase your focus on revenue-driving products and remove those which aren’t performing well from your product line. Alternatively, if a product/service isn’t performing as well as expected, you may wish to shift your focus and spend some more time marketing it. That way, you’re not focusing all your attention on what’s selling now and can diversify for the future.
KPI #5: Average Purchase Value
The average purchase value of items is yet another KPI to look at. Monitoring this KPI will involve looking at the value of purchases versus the average number of units per transaction.
Sometimes running an eCommerce business isn’t about selling a high volume of products. If your average purchase value of products is high, you don’t necessarily need to move as many units. For example, if you have high-value products such as vehicles, you won’t need to sell as many items as a grocery store would. Providing your sales growth and profits are looking healthy, there’s nothing wrong with that.
This is, therefore, a great KPI to focus on but it will depend on the type of products or services you’re selling. It may also provide some much-needed reassurance if you are worried about low numbers of sales.
With so many KPIs to keep track of, it can get confusing very quickly. A great way to keep on top of various KPIs is to use software that ties all the data you need together in one handy place.
Smart Merchandiser is a tool that uses the vital data you need to monitor and displays it in a way that’s simple to use. With Smart Merchandiser’s easy-to-use and unobtrusive analytics overlay, it’s easy enough to see things like sales figures, growth, purchase values, and analyze income sources on each product. Businesses equipped with a tool like this have a much easier time analyzing various parts of their business.
With easy-to-understand data like this, it leaves you in a much more informed position. This will enable you to make the necessary business decisions and changes that will lead to further business growth.