Profit Improvement StrategyActivity Based Gauges - One sheet of paper can tell you so much!
Success and double-digit sales growth for an independent retail store happened with a little effort and a simple sheet of paper.
Our goal was to establish a baseline and increase the conversion ratio of potential leads to sales.
This effort improved the company’s planning and execution functions. We learned why they were losing business and we helped develop new strategies resulting in more sales.
Management of a retail store wanted to understand and grow its sales.
Often the only reports available to the business owners are the financial statements. Business owners, however, are not accountants — and don’t want to be accountants. As a result, these reports are often confusing, come with a frequency that does not match the real pace of business, and so, are not effective to help manage a business on a day-to-day basis.
We introduced a tracking sheet which focused on the business activities and provided immediate, valuable and actionable data. We helped train the staff to understand not only how to use the sheet, but also what information would be collected and why it’s critical for business growth.
The how and why of this tool
To understand business sales activities, it’s important to understand the sales which are lost. We put a customized tracking chart on a clipboard at the sales desk in the middle of the store and asked the sales team to fill it out after each customer interaction, one sheet per day.
This tracking sheet highlighted the following metrics:
- Number of opportunities or leads per day – We received data on the number of potential customers in the store every day. Instead of guessing which days were busier than others, we had real data to review for insights and trends;
- Conversion ratio of opportunities to sales – Once we knew the number of opportunities and the number of actual sales, we calculated the conversion ratio. The first time we did it, it was around 20%. This means that for every customer that purchased something each day, there were four potential customers in the store who didn’t buy anything.
Having this data brought the focus of the efforts to right where the “low hanging fruit” was. It was clear to the business owners that working on improving the conversion ratio would provide the easiest path to sales growth.
We now had a gauge to measure the impact of future activities. The sales team was able to implement a new action and then check the gauge to determine if the conversion ratio went up, down or stayed the same.
This gauge is called an “actionable metric”, as it measures the right activities in real time. The business can take action based on real data combined with gut instincts – much better than decisions based on gut instincts alone.
We then observed an engaged sales team communicating with the business owners around the data and the insights observed. There was even a positive change in the conversion ratio just by measuring it! The competitive nature of the sales people kept them focused on ticking the “sale” box instead of the “no sale” box. The team was also able to identify trends in the reasons for not getting a sale (for example, customers were looking for baby furniture, but they didn’t sell it – maybe they should?).
This tool was a catalyst which started meaningful conversations around meaningful activity-based metrics. The guaranteed result to this effort was considerable and measurable sales growth.
Business owners with accountability to measure and manage business activities with actionable metrics results in growth – period. There is software available to make measurement even easier, and if you’re not harnessing these tools to measure the right activities you are missing out on big opportunities.