Are Your Sales Up to Par?

It’s no secret that the economy has caused many businesses to downsize staff.  With sales and profits down many companies have had no choice but to make unwanted cuts to keep their business profitable.  To stay profitable businesses need to get the most out of the employees they were able to keep.  This means many times that those employees will have to take on the extra duties or go that extra mile.

If goals are being met and revenue is where you want it to be, you may not need to use any measuring devices. But if there is a problem, the following ratios, if applicable to your particular business, may help you pinpoint the problem, analyze it, and take action.

The ratios can be applied to your entire business, to a division or department, or to one employee. Progress can be measured by comparing numbers from one month to the next.

Ratio 1: Total sales compensation/gross sales = direct selling costs (%).

Ratio 2: Gross sales/total hours worked by salespeople = sales dollars per hour.

Ratio 3: Number of sales/number of full-time-equivalent salespeople = number of sales per salesperson.

Ratio 4: Gross sales/number of full-time-equivalent salespeople = sales dollars per salesperson.

Ratio 5: Gross sales/number of sales transactions = average sales dollars per transaction.

Tip: The numbers you get from these ratios might also be used to develop sales quotas or targets.

If you would like further information on making your business more profitable contact us at (260)497-9761 and speak to our CPA's for all your financial needs.