Increase the profitability of your business

In my blog“New Financial Year Resolutions to “Kickstart” The New Financial Year” one of the suggested resolutions was for you to “Find 4 Key Performance Indicators (KPIs) that have a big impact on your business’ profit and cash flow”.

 Firstly it is important to understand what a KPI actually is. A KPI is simply a measure of performance either for the business as a whole or a part of the business. A KPI allows you as the business owner to track whether or not your business is improving and if not where you need to focus your attention.    

 If you’re struggling with where to start, here some examples of KPIs that will help you identify why your sales in a retail or hospitality business might be going up or down. 

1. Number of customers – it’s a simple measure especially if you have a good point of sale (POS) software. Ideally the number of customers you have should be increasing.
2. Number of transactions per month. You can measure this simply by counting the number of invoices you issue or the number of sales from your POS. 

You can using these 2 KPIs to calculate two more KPIs. 

3. Average sale value – divide your total sales amount (ex GST) by the number of transactions.
4. Average number of transactions -If you divide your number of customers by the number of invoices issued this will tell you the number of times on average each customer is buying from you. 

For your business to grow then each of these KPIs should be increasing. If they are not increasing or are increasing more slowly than you want then this is where you should focus your energy or resources. 

Remember – “What you measure you can manage”