Understanding your sales trends to drive business success

If cash flow is the lifeblood of a business, being able to understand sales trends must be the heart. In this article, you’ll discover the value of sales trends and how you can use them to better run your business. If you enjoy this post, you can discover more financial tips for small business owners in our White Paper, 5 Ways Your Financials Can Help You Run Your Business Better.

What questions are you asking?

Two of the most important questions many successful entrepreneurs ask are:

1. How much have your sales grown or shrunk against the same period last year?

2. Why?

Question 1 is not as important as question 2. If you know why your sales are growing or shrinking, then you understand what is and isn’t working in respect of your businesses growth plans. Tracking monthly and year-to-date sales vs. budgets and forecasts is a key discipline for business success. Unless you’re tracking your sales and measuring them against what you have done or have budgeted to do, you can’t really know if your business is succeeding.

Define your sales targets

As with all tracking, you need to start with defined sales goals that are in line with your business objectives. This helps you focus, and the more specific and measurable your goals, the greater your focus will be. You shouldn’t only be looking at the bottom line; you should also be taking careful note of how sales results were achieved. For example, do you only sell a certain product successfully below a certain price? This information becomes essential to your pricing strategy, which feeds into successful sales.

Track your profit margins

You also need to look closely at your profit margins – are they realistic for both you and your customers. Tracking sales against previous years and months enables you to identify trends. This is easy to do with a good reporting tool. Perhaps your sales have grown because you’ve gained a valuable new client or introduced a popular new product line. Whatever the reason, understanding it lets you capitalize on the opportunity it presents. If the new client is in an industry you don’t usually serve, you can now market your offering to other prospects in that industry. If the new product line is that popular, does it make older lines less viable?

On the other hand, your sales might have shrunk because you lost a good salesperson or because you put your prices up. As long as you understand why—you can fix the problem. Do you need to hire a different calibre of salesperson or do you need a better staff retention programme? And what informs your pricing?

Sales trends give you a wealth of valuable information if you can see it and use it to your advantage. All of this information is available from your accounting system, and good business intelligence solution such as Sage Intelligence enables you to translate your figures into a picture of what’s happening in your sales and why—giving you a strong helping hand towards your progress and success.