Finding Effective Sales Metrics

All businesses measure their sales at regular intervals. The sales metric that many companies use to determine how they are doing is gross sales. But often those numbers are presented in such a way that it’s hard to gain any meaning from them. The information you get from any type of sales metric needs to be presented so you can draw conclusions about the meaning. For instance, for retailers who are open every day, sales by the week have more meaning than sales by the month since you can easily compare weekly time periods. Sometimes it is helpful to measure customer segments. An example would be dividing customer accounts up by territory.

One problem with measuring gross sales is that it doesn’t give you a picture of the contribution that each individual salesperson is making to your bottom line. I prefer to measure margin dollars (sales minus non-variable cost of goods). If the salesperson has control over variable items, like freight, I would measure that as well. Now the report you generate for each salesperson shows you at a glance what contribution he/she is making to the company’s success.

Finding the right sales metrics for your company will not only help you understand how the company is performing it can also assist you in strategic sales planning process.

-barney