The new year dawns under the cloud of economic headwinds that could persist for most of the next 12 months. Those headwinds disproportionately pressure small businesses, who boast fewer resources or rainy-day funds than global competitors. To alleviate the impact of these headwinds, small businesses must become more strategic than ever with their sales. That means analysing and understanding key sales metrics.
There are dozens of metrics that provide insight and value. For small businesses, here are a handful of the metrics that are straightforward to measure but drive great insight and impact.
Conversion rate
The conversion rate calculates the percentage of leads that convert into customers. The formula to calculate this is simple: number of customers acquired, divided by the number of leads, multiplied by 100. Tracking conversion rates allows you to track how effective your sales processes are. Measuring it regularly enables you to identify progress, what’s working, and what needs improvement.
Conversions by channel
Tracking conversion channel is an insightful sales metric that measures the number of leads from each source like ads, events, or social media. When effective, this metric allows you to identify the most fruitful and effective channels, so you can steer more resources and investment to those and away from channels that aren’t as effective.
Customer acquisition cost
Customer acquisition cost (CAC) is another essential metric that measures the money spent to acquire a new customer. To calculate, divide the money spent on marketing by the number of new customers. Again, through regular monitoring you can better optimise your sales and marketing spend.
Churn rate
A churn rate enables you to understand how frequently you lose customers. This is important, because it enables you to understand your customers’ loyalty and satisfaction. If you have a high churn rate, it’s an indication that you need to improve your product or service.
YoY leads
The key to all metrics is charting their progress. Year-over-year (YoY) leads growth compares the number of new leads generated with the same period in the previous year. Tracking this over time gives you longer-term trends and insights, and also allows you to set targets and allocate resources. The ability to forecast is essential, because it helps project future sales based on historical trends and other factors like seasonality and market conditions. That means you can be proactive to challenges, not reactive.
Sales funnel
Your sales funnel is the journey a prospect takes from initial contact through becoming customers. The journey typically begins with qualification, where prospects might register for a demo or sign up for a free trial. That’s often followed by an initial offer, or for bigger deals, a proposal. That’s followed by a period of negotiation – for example on price, terms, deliverables, and features – and finally an agreement. Tracking the sales funnel enables you to identify bottlenecks. For example, if you lose leads after the qualification period, perhaps the product or service needs to be adjusted, but if it’s in negotiation, it might be a question of price or terms.
With economic pressures set to persist for much of 2024, every lead and customer takes on an added layer of significance for small businesses. However, through careful analysis of some simple yet impactful metrics, small businesses can optimise their sales, improve their customer experience, and create more opportunities for growth.
