Hello! In this article we will talk about the analysis of the company's sales volume.
Today you will learn:
- Why is it necessary to analyze the sales volume of an organization;
- How to conduct sales research correctly;
- What methods of sales volume analysis exist.
Purpose of sales analysis
Sales volume – one of the most important indicators of company performance. A change in this indicator in one direction or another may indicate changes in market development trends, shortcomings in the organization’s work, which, in the absence of a timely response, can lead to serious problems. To avoid “unpleasant surprises,” it is necessary to regularly monitor your company’s sales.
In addition to preventing possible problems, sales volume analysis solves the following problems:
- Allows you to obtain information on the basis of which the manager can make an effective management decision (both tactical and strategic);
- Identifies “profitable” and “unprofitable” products in the company’s product portfolio. Allows you to make the right decision regarding the development or removal of a product from the range;
- Allows you to evaluate the efficiency of your company’s departments, for example, department or sales;
- Largely determines the company's sales policy;
- Helps.
If you are faced with at least one of the listed tasks, you should conduct sales monitoring.
The market today is developing very quickly. New brands are appearing, old products are being replaced by new products, and the consumer is becoming more and more demanding. It is these factors that determine the frequency of product sales analysis. Experts recommend monitoring changes in your company’s sales at least once a month.
The main stages of analyzing company sales
Before we begin to explore how to analyze a company's sales volume, it is necessary to review the main stages of this process.
Sales volume analysis- one of the types. Unlike market analysis, when studying sales volume, exclusively secondary intra-company information is used. Collecting this information constitutes the first stage of the sales analysis process.
The second stage is the determination of indicators for analyzing the company’s performance. We will examine them in more detail when considering specific analysis techniques.
The third stage is the analysis of the collected information and evaluation of the result.
The fourth stage is the identification of influencing factors.
Types of sales volume analysis
Depending on the purpose, sales volume analysis can take the following forms:
- Analysis of sales volume dynamics. In this case, our task is to determine the change in the company's sales volume compared to the previous period. This type of analysis is necessary for timely detection of changes in market trends, as well as searching for problem areas in the organization’s work;
- Structural sales research carried out to justify management decisions regarding the company’s product range. If you sell only one type of product, then there is no need to carry it out;
- Benchmark analysis of sales volume. It is carried out to compare planned indicators with actual ones. Necessary for timely taking corrective actions. It is carried out more often than others.
- Factor analysis implemented after any type of sales volume analysis. Allows you to determine the factors of the internal and external environment of the organization that influenced the evaluation indicator.
Each of the presented types of monitoring has its own tools. Let's get to know him.
Sales analysis methods
Before you begin to study methods of sales analysis, you need to become familiar with the concept of KPI, since the same method can be based on different KPIs.
KPI – indicators of the company’s performance.
When assessing a company's sales volume, we will analyze various indicators, depending on the type of analysis.
Methods for analyzing sales dynamics
This type of analysis will allow you to evaluate development trends. You can conduct both comprehensive research and research on individual product categories.
As a result of the analysis, you will get an increase, decrease or stagnation of the indicator used for the assessment compared to the previous period.
As part of assessing the dynamics of sales volume, it is necessary to carry out the following types of work:
- Analysis of the dynamics of enterprise profit – compare revenue for the current and previous periods. Sales volume may increase, but revenue may fall. This is possible, for example, when the price of a product decreases;
- Estimation of sales uniformity. There are seasonal goods, the demand for which needs to be stimulated during unfavorable periods. An analysis of the uniformity of sales will help identify seasonality. To do this, keep a chart of sales volumes for several seasons (you can take a year, but do not forget to take into account the impact of changes in product prices, discounts and other incentives) and see in which periods there was a significant increase and decrease in sales (several times). If such fluctuations are observed, then you need to think about sales promotion during unfavorable periods.
Methods of structural sales analysis
Based on the results of the structural analysis, the manager makes a decision on the development or liquidation of the product, on expanding or expanding the range. Let's look at the most effective methods of structural sales analysis.
ABC analysis.
This type of research is aimed at assessing the value of each product in the company's product portfolio. The value of a product is determined by the amount of profit that the product brings to the common treasury.
According to ABC analysis, the company’s entire product range can be divided into three groups:
- Group “A”– products that bring the greatest amount of profit;
- Group “B”– “middle peasants”, they are not so valuable for the company, but still collectively bring a fairly large amount of profit;
- Group “C”- a heavy burden for the company, these products bring very modest income.
Using ABC analysis, you can determine the value of product categories not only by the volume of profit, but also by the share of categories in the product portfolio.
The numerical boundaries of each group are presented in the table.
Please note that this table displays the Pareto principle. The Pareto principle states that 20% of production brings 80% of a company's profit.
At the same time, using ABC analysis, you can evaluate the contribution of not only individual products to the company’s profit, but also the value of suppliers, buyers, distribution channels, and conduct production analysis.
ABC analysis steps:
- Determination of the object of analysis: product, suppliers, buyers, sales channels, or others;
- We determine the KPIs by which the object will be evaluated. This does not have to be revenue or the share of a product group in the product portfolio (or the share of deliveries, purchases, sales, depending on what you are analyzing); you can take the volume of sales, sales or any other financial results as an indicator for evaluation. It all depends on your goal;
- We collect information on each KPI, determine the share of each object, calculate the indicator on an accrual basis and rank the objects;
- We fill the groups and draw conclusions.
At the same time, if any products in your range fall into group “C”, this does not mean that you definitely need to get rid of them. This could lead to the loss of an entire consumer segment.
Particular attention should be paid to products that fall into category “A”, since if consumers are dissatisfied with the quality of products in this category, the company will lose a large amount of profit.
Let's see how ABC analysis works using the example of analyzing the product line of a McDonald's restaurant.
|
Nomenclature groups or product names |
Sales volume, million units | Share in sales volume, cumulative total, % | Profit volume, million rubles | Revenue on an accrual basis |
Group |
|
Sandwiches |
5,184 | 20 | 522,08 | 24,8 | |
|
Potato |
3,856 | 35 | 306,216 | 39,4 | |
| 3,791 | 49 | 305,216 | 53,9 | ||
| 3,452 | 62 | 236,16 | 65,2 | ||
| 3,279 | 75 | 229,53 | 76,1 | ||
| 2,532 | 84 | 221,76 | 86,6 | ||
|
Milkshakes |
2,356 | 93 | 200,26 | 96,2 | |
| 1,722 | 100 | 80,564 | 100 |
As we can see, the company's most profitable products are sandwiches, potatoes, sauces and drinks. These product lines should be expanded.
Desserts and sets were included in group “B”. If desired, these products can be transferred to category “A” through active promotion and improvement of product quality.
Break even.
It is necessary in order to determine the minimum volume of products that the company needs to sell at a certain price per unit of product so that sales income covers the full costs of the enterprise. This method of analyzing sales volume is indispensable when introducing a new product to the market.
In order to build a break-even point, the following data is required:
- Product cost (average bill);
- Sales volume for the period;
- Fixed costs;
- Variable costs;
- Full sales;
Stages of building a break-even point:
- Draw a coordinate system. We call the “x” axis “number of purchases,” and the “y” axis “revenue.”
- We build two direct lines: product turnover (y=cost*x) and total costs (y=volume variable costs*fixed costs).
The point of intersection of these two lines is the break-even point. On the “x” axis you will see the minimum volume of products that you need to sell in order not to work at a loss.
Cost-benefit analysis.
A company's existing products need to conduct a cost-benefit analysis. This will allow you to timely identify products that are no longer profitable.
And if you compare the profitability of your products with the profitability of identical competitors' products, you can identify the strengths and weaknesses of your company's product range.
Benchmark analysis of sales volume
Control is carried out by comparing the planned sales volume with the actual one. If a deviation is identified, it is necessary to conduct a factor analysis and begin corrective action.
Factor analysis
You have analyzed sales volume and identified a deviation. What to do next? It is necessary to identify the factors that influence the indicator and reduce or eliminate their influence.
To do this, use two formulas that will allow you to evaluate the impact of price and sales volume on the company’s revenue:
- Volume deviation = (Actual volume – Planned volume)*Planned price. The resulting number is the change in profit (in monetary terms), which occurred under the influence of changes in the sales volume of the analyzed product;
- Price deviation = (Actual cost – Planned cost)*Actual volume. The resulting number is the change in profit (in monetary terms) that occurred under the influence of a change in the price of the analyzed product.
Excel as a tool for analyzing sales volume
Any financial analysis is a rather labor-intensive process, rich in mathematical calculations. In the age of high technology development, it would be strange to keep records and analysis on paper. We won’t offer you this, because there is an excellent electronic substitute for a paper sheet - good old Excel.
Excel is an ideal tool for analyzing sales volume because:
- Provides quick search for information, just enter data into tables;
- Automatically calculates complex formulas;
- Simplifies the process of analyzing results by visualizing them in the form of diagrams (especially useful when conducting benchmark analysis and analyzing sales dynamics);
- Knows how to build charts (indispensable when constructing a break-even point);
- You know how to work with him;
- Even purchasing a licensed version of the program will not hurt your wallet.
Analyzing a company's sales and profits is one of the important aspects of a marketing specialist's activity. Having a properly compiled sales report at hand will make it much easier for you to develop a marketing strategy for the company’s development, and the answer to the management question “What are the main reasons for the decline in sales?” won't take much time.
In this article we will look at an example of maintaining and analyzing sales statistics at a manufacturing enterprise. The example described in the article is also suitable for retail and wholesale trade, for analyzing sales of an individual store. The template we prepared for sales analysis in Excel is very large-scale; it includes various aspects of analyzing sales dynamics that are not always needed by every company. Before using the template, be sure to adapt it to the specifics of your business, leaving only the information that is needed to monitor sales fluctuations and assess the quality of growth.
Introductory Points to Sales Analysis
Before conducting a sales analysis, you need to collect statistics. Therefore, determine the key indicators that you would like to analyze and the frequency of collecting these indicators. Here is a list of the most necessary sales analysis indicators:
| Indicator | Comments |
| Sales in pieces and rubles | It is better to collect sales statistics in units and rubles separately for each product item on a monthly basis. These statistics allow you to find the starting point of sales decline/growth and quickly determine the reason for such a change. Also, such statistics allow you to track changes in the average price of shipment of goods in the presence of various bonuses or discounts for partners. |
| Unit cost | Product cost is an important aspect of any sales analysis. Knowing the level of product cost, it will be easier for you to develop trade marketing campaigns and manage pricing in the company. Based on the cost, you can calculate the average profitability of a product and determine the most profitable positions from a profit point to stimulate sales. Statistics on cost can be maintained on a monthly basis, but if this is not possible, then it is advisable to track the quarterly dynamics of this indicator. |
| Sales by sales lines or sales regions | If your company works with different regions/cities or has several divisions in the sales department, then it is advisable to keep sales statistics for these regions and areas. If you have such statistics, you will be able to understand which areas are primarily responsible for the growth/decline in sales and quickly find out the reasons for deviations. Sales by destination are tracked on a monthly basis. |
| Product distribution | Product distribution is directly related to the growth or decline of sales. If a company has the ability to monitor the presence of goods in the Republic of Tatarstan, then it is advisable to collect such statistics at least once a quarter. Knowing the number of points at which the shipped item is directly presented, you can calculate the turnover rate of goods at a retail point (sales / number of RT) and understand the real level of demand for the company’s products. Distribution can be monitored on a monthly basis, but it is most convenient to monitor this indicator quarterly. |
| Number of clients | If a company works with a dealer level or in the B2B market, it is advisable to track statistics on the number of clients. In this case, you will be able to evaluate the quality of sales growth. For example, the source of sales growth is an increase in demand for a product or simply geographic expansion in the market. |
Key points to pay attention to when conducting sales analysis:
- Sales dynamics by products and areas that make up 80% of the company’s sales
- Dynamics of sales and profits compared to the same period last year
- Changes in price, cost and profitability of sales for individual items, product groups
- Quality of growth: sales dynamics per 1 RT, per 1 client
Collection of sales and profit statistics
Let's move directly to an example that clearly shows how to do a sales analysis.
The first step is to collect sales statistics for each current product item of the company. We collect sales statistics for 2 periods: the previous and current year. We divided all the articles into product categories for which we are interested in seeing the dynamics.
Fig. 1 Example of collecting sales statistics by product items
We fill out the table presented above according to the following indicators: pieces, rubles, average selling price, cost, profit and profitability. The table data will be the primary source for future sales analysis.
Positional sales statistics for the year preceding the current period are necessary to compare current reporting indicators with the previous year and assess the quality of sales growth.
Next, we collect shipment statistics for the main areas of the sales department. We break down total revenue (in rubles) by sales areas and main product categories. Statistics are needed only in ruble terms, as they help control the overall sales situation. A more detailed analysis is necessary only if there is a sharp change in sales dynamics in one of the areas.
Fig. 2 Example of collecting sales statistics by sales directions and regions
Sales analysis process
Once all the necessary sales statistics have been collected, you can proceed to sales analysis.
Analysis of sales plan implementation
If the company is planning and has established a sales plan, then the first step is to evaluate the implementation of the sales plan by product groups and analyze the quality of sales growth (the dynamics of shipments in relation to the same period last year).
Fig. 3 Example of analysis of sales plan implementation by product groups
We analyze the implementation of the sales plan using three indicators: shipments in physical terms, revenue and profit. In each table we calculate the % of plan completion and dynamics in relation to the previous year. All plans are divided into product categories, which allows you to understand in more detail the sources of undersales and overfulfillment of the plan. The analysis is carried out on a monthly and quarterly basis.
In the table above, we also use an additional “forecast” field, which allows us to forecast the implementation of the sales plan given the existing dynamics of shipments.
Analysis of sales dynamics by areas
Such sales analysis is necessary to understand which areas of the sales department are the main sources of sales. The report allows you to evaluate the sales dynamics of each direction and timely identify significant deviations in sales in order to correct them. We break down total sales by OS areas, and for each area we analyze sales by product category.
Fig. 4 Example of sales analysis by area
To assess the quality of growth, the indicator “sales growth dynamics compared to last year” is used. To assess the significance of a direction in the sales of a particular product group, the parameter “share in sales, %” and “sales per 1 client” is used. Dynamics are monitored quarterly to eliminate fluctuations in shipments.
Sales structure analysis
Analysis of the sales structure helps to take a general look at the effectiveness and importance of product groups in the company’s portfolio. The analysis allows you to understand which product groups are the most profitable for a business, whether the share of key product groups is changing, and whether price increases cover the increase in costs. The analysis is carried out on a quarterly basis.
Fig. 5 Example of analysis of the sales structure of the company’s assortment
Based on the indicators “shipments in kind”, “revenue” and “profit”, the share of each group in the company’s portfolio and the change in share are assessed. The indicators “profitability”, “cost” and “price” evaluate the dynamics of values in relation to the previous quarter.
Fig. 6 Example of analysis of cost and profitability of sales
ABC analysis
One of the final stages of sales analysis is standard, which helps to implement a competent assortment policy and develop effective trade marketing activities.
Fig. 7 Example of ABC analysis of assortment
ABC analysis is carried out in terms of sales and profits once a quarter.
Residue control
The final stage of sales analysis is monitoring the company's product inventory. Analysis of balances allows you to identify critical items for which there is a large surplus or a shortage of goods is predicted.
Fig. 8 Example of analysis of product balances
Sales report
Often in companies, the marketing department is accountable for the implementation of sales plans. For a weekly report, it is enough to track the level of implementation of the sales plan as a cumulative total and indicate the forecast for the implementation of the sales plan based on the current level of shipments. Such a report allows you to timely identify threats of non-fulfillment of the sales plan and develop corrective measures.
Fig.9 Weekly sales report
Attach to such a report a small plate describing the main threats to the implementation of the sales plan and proposed solutions that will reduce the negative impact of the identified reasons for failure to fulfill the plan. Describe what alternative sources can be used to increase sales.
In the monthly sales report, it is important to reflect the actual implementation of the sales plan, the quality of growth in relation to the same period last year, an analysis of the dynamics of the average shipping price and the profitability of the product.
Fig.10 Monthly sales report
You can download the sales analysis template presented in the article in the section.
an indicator of the activity of a manufacturing or trading enterprise, which is actually the amount of revenue received in the company's bank account and expressed in monetary terms in the balance sheet
Financial indicator "sales volume", including critical sales volume, net sales volume, gross sales volume, break-even sales volume and sales volume per employee, calculation of sales volume and analysis of sales volume for the reporting period, change in sales volume, decline and growth sales volume, methods of increasing sales volume and accounting for sales volume in the balance sheet
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Sales volume is the definition
Sales volume is a concept used to determine the success of activities and further analysis, and expressed in accounting by the amount of funds received into bank accounts from. The sales volume of an enterprise, as a rule, depends on both supply and their successful interaction. Sales volume is also called the ratio of the enterprise to for a certain period of time. The “sales volume” indicator corresponds to the widely used global indicator “gross income”.
Sales volume is the most important indicator of a company’s performance, representing the amount that was actually received into the company’s accounts as payment for sales and services for a certain period of time. Sales volume is also often referred to as gross (sales volume) or product sales revenue. Gross sales include .
Sales volume is the most important result of the enterprise’s activities corresponds to the gross income indicator accepted in world practice.
Sales volume is clear evidence of how successful the company is, since sales volume refers to a certain amount of money that has been credited to the company’s accounts for goods sold over a certain period of time.
Sales volume is the quantity of goods sold during a certain period in monetary or physical terms.
Sales volume is a financial indicator equal to the ratio of a company's market capitalization to its annual revenue.
Sales volume is funds received from buyers for goods sold to them.
Sales volume is the most important result of the enterprise’s activity corresponds to the “gross income” indicator accepted in world practice.
Sales volume is quantity of product sold/bought (factor of production). At most, sales volume depends on the interaction of supply and demand, which determine the equilibrium market price.
Sales volume indicators
The main unit that forms sales volume indicators is the sale itself, that is, a business transaction consisting of services in exchange for money.
It is worth saying that sales volume is extremely necessary to calculate and analyze for the reason that you can see how much the number of sales has increased, or, on the contrary, how much it has decreased. This will allow each owner to monitor its success and make timely decisions in the event that performance plummets.
Gross Sales
Gross sales are total sales (including credit sales) for the reporting period, valued at full prices (invoice prices) without taking into account sales, returns of products sold, price reductions and other adjustments.
Net sales
Net sales are gross sales minus discounts and incentives provided to the company's customers and minus the cost of goods returned by the buyer. Net sales are a key metric in assessing a company's trading performance and trends.
As for net volume, its formula is very simple to calculate, and it is as follows:
Target sales volume
Purpose-oriented sales is the sales volume corresponding to the target profit. It is calculated using the following formula:
Determining the target sales volume in the analysis of the cost-volume-profit relationship is used to determine: the physical volume of sales; price level; production and sales, which would ensure the maximum level of net (marginal) income for the product.
In addition, calculating the target sales volume allows you to optimize sales structures taking into account the planned values for individual products and existing restrictions on production capacity.
Critical sales volume
The critical sales volume is the minimum sales revenue required by an enterprise, which allows it to ensure sales in unfavorable conditions of demand for its products (works, services). Determining the critical sales volume is of practical importance in cases where the price level for products does not provide the enterprise with a profit from sales, or when low demand for products does not make it possible to sell such a quantity that would be sufficient to exceed revenues over expenses.
In other words, under the influence of the price level, or the value of the natural volume of sales, or (as a rule) both of these factors, there is simultaneously a danger of receiving a loss from sales instead of a profit. Then an answer to the question is needed: what should be the minimum revenue that covers all variable and fixed costs with zero profit. The answer to this question is ambiguous and depends on the specific conditions of price dynamics, natural sales volume, the ratio of variable and fixed costs for products sold.
If the listed factors lead to a loss on sales, an increase in sales revenue to the required critical size is possible with the differentiated use of individual factors that can actually be changed in the specific conditions of the enterprise. In most cases, both price adjustments and real sales volume adjustments are used simultaneously.
Sales volume per employee
Sales per employee is one of the indicators. It is calculated as the quotient of the turnover (sales volume) for the year divided by the average number of employees of the enterprise.
Enterprise break-even point
An important role is also played by the break-even point, which stands for the volume of sales of already produced products, where the revenue managed to cover production costs.
You also need to know what the break-even and critical sales volume is, which must be regularly made over the financial turnover of the enterprise. In order to be able to make the calculation, you must have the following formula:
For those who are interested in the question of how strong the enterprise is, and whether it faces other financial nuances, you need to know that there is a calculation of the margin of financial strength. Its essence lies in the fact that it is the difference between the existing volume and the output volume present at the break-even point.
Thanks to this, you can immediately understand how much and in what period of time the sales volume may decrease, and what needs to be done to avoid losses.
There is a special formula that can help calculate all the necessary algorithms. It is as follows:
Sales volume in accounting
Sales are of a recurring nature, and for accounting purposes sales are divided into:
Current sales;
Upselling (selling products that are no longer produced);
Non-core sales.
In the accounting department, only cash receipts from the company’s regular trading operations are entered into the “Sales volume” column; the rest of the receipts are recorded separately in the profit and loss statement in the “other income” column.
Sales in accounting
The sale of products (works, services) is the final stage of the circulation of funds in the economic activity of an organization. When recording the fact of the sale of products, on the one hand, it is necessary to show the actual disposal (shipment) of finished products from the organization, and on the other, to determine whether the funds cover (or other) funds received from buyers of products, costs of their production and sale. Thus, accounting must calculate the financial result (the ratio of income and expenses) from product sales. In this case, the financial result can be either profit or loss.
To calculate the sales volume of finished products and identify the financial result from the sale of products, synthetic account 90 “Sales” is used.
The financial result from the sale is the difference between the revenue for products sold and the amount:
VAT received from the buyer as part of the proceeds, subject to transfer to the budget;
Actual production sold products;
Amounts of actual general business expenses for the reporting period, subject to their direct write-off to account 90 “Sales”;
Amounts of actual sales expenses for the reporting period.
Company sales accounting
Management decisions when analyzing sales volume
If revenue dynamics are negative (or its growth rate is decreasing), financial actions should be aimed at studying the reasons that caused the decline in sales volumes.
Studying the reasons for the decline in sales
Among the main reasons are the following:
The product life cycle is approaching decline. The department, together with production departments, needs to develop a new type of product;
Significant increase (overspending) of costs.
An incorrectly chosen pricing policy (underpricing) leads to a disproportionate increase in the initial cost in relation to sales prices. In this case, the management of the enterprise and the marketing department should study the possibilities of increasing prices. However, price increases must be consistent, since a sharp increase in prices can cause a decrease in the natural volume of sales and, while gaining in price, the enterprise will lose in overall turnover and reduce the turnover of finished products.
Changes in sales volume
Almost all of the actual results you receive will differ to one degree or another from the planned indicators (that is, the data obtained will be more or less than planned). Let's look at all the possible options and start with lower than expected sales.
Low sales volume
Sales volume can be easily determined using the following formula:
If your sales volume turned out to be lower than planned, this could happen for two reasons:
Fewer items were sold;
You were forced to sell goods at prices lower than planned.
Fewer items sold
Let's first look at the case of fewer items sold. This is the most common reason for a decrease in sales revenue. Typically, this can be due to several reasons:
Shortcomings in the field of marketing;
High competition;
Your new product or service competes with your other products or services;
Natural and climatic factor.
There can be many more reasons of this kind.
Reduced prices for goods
As for the price, there may be much fewer reasons for reducing it:
Your price for a product or service is too high;
A large number of your goods were purchased in bulk, which required the provision of appropriate price concessions to customers;
Reducing prices for a given product/service on the market.
What needs to be done to improve the situation? The final decision may require a number of measures and will largely depend on the specifics of your business.
Actions to take when sales volume decreases
Let's now look at several possible options for your actions.
Increase in sales revenue
There are three simple tips:
Raise prices while leaving the quantity of goods sold unchanged;
Increase the number of goods sold without raising prices;
Do both!
The advice to increase the price will probably remain just advice until you improve your product or service, giving it new consumer properties.
Increase in the number of goods sold
This is one of the most suitable solutions. You will have to take measures that may not only bring profit in a short time, but also require additional costs.
So what should you do? Here are some suggestions:
Have a sale, but be careful. This will simultaneously mean a reduction in prices, so you will have to sell more goods;
Disseminate as much information as possible about your products, paying attention to marketing. This will require additional costs, so you must be absolutely sure that the game is worth the candle. Whatever else you do, try not to forget about marketing. Otherwise, buyers will quite quickly forget about you and your products;
Take advantage of special offers, free gifts, sweepstakes, etc., but be aware of the costs involved;
Offer additional free services;
Update your products or services, giving them a more attractive look;
Explore new markets. After all, sneakers, for example, have long ceased to be purely sports shoes.
Increased sales volume
Now let's look at the opposite situation, where sales were higher than expected. Again, two main reasons can be noted here:
You sold more products than you expected;
You sell at higher prices than you expected.
By resting on your laurels, you may miss out on great opportunities and fail to notice new promising trends.
Possible reasons for an increase in planned sales volume may be the following:
The capacity of your market is greater than expected;
Emergence of a new market;
An unexpected increase in the price of a similar product on the market;
Disappearance of competing goods on the market;
Closure of competing enterprises;
Natural and climatic factor;
Higher labor productivity in your enterprise.
There are many other reasons related to the specifics of your business.
Using Sales Boost
How to take advantage of unexpected opportunities associated with exceeding sales targets? Here are some suggestions:
Features of the indicator behavior
From a business cycle perspective, the retail sales indicator is characterized as a "coincident indicator", i.e. its fluctuations coincide with fluctuations in the business cycle. However, cyclical fluctuations are minor; consumer purchasing can often continue to rise even after a recession has begun. On an annual basis, retail sales are never diverted. The minimum annual increase (0.9%) was in 1991. In addition, monthly retail sales naturally increase even during recessions. The best way to link retail sales and the business cycle is to calculate the value of sales by retail growth on a monthly basis. Most months will show increases, but during a recession they will become smaller and declines in retail sales will become more frequent.
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First of all, it should be noted that revenue represents money received by the enterprise as a result of the sale of products, goods or services. A decrease in revenue is characterized by a decrease in cash flow, received by the enterprise from the sale of products (goods, services), which can be caused by a number of objective or subjective reasons.
Revenue is very important for an economic entity, as it is one of the main sources of financing activities. In this regard, the organization’s management must regularly monitor any changes in this indicator and respond to them in a timely manner.
REFERENCE. There are situations when the management of a company deliberately reduces sales revenue (for example, in order to conquer new markets, the price of a particular product is reduced, which subsequently affects the amount of revenue).
What factors influence this indicator?
It should be noted that the amount of revenue is influenced by many different factors, which can be divided into two large groups:
Reasons why the fall occurs
The following are the most common reasons for a decrease in revenue:
- Product obsolescence– sooner or later the market becomes saturated with a certain type of product, which causes a decrease in sales volumes and revenue.
IMPORTANT. An entrepreneur should promptly update the range of products produced, giving it new quality characteristics or creating another product.
- Seasonal drop in demand– there are specific types of goods, the demand for which fluctuates depending on the time of year. For example, swimsuits will be sold much more actively in the summer. However, in winter the demand for them drops sharply.
- Increase in cost– for example, an increase in the price of raw materials and materials can significantly increase the cost of manufactured products. At the same time, it is not always possible for a commodity producer to raise the price, as this can reduce the competitiveness of the product. As a result, there is a decrease in sales revenue.
- Weak advertising and marketing policy– today active advertising is one of the main factors contributing to an increase in sales.
- Decrease in production volumes– for example, during a crisis, many enterprises significantly reduce production volumes, which ultimately affects the amount of revenue, etc.
For clarity, let’s look at the reasons for the decline in revenue using the example of a construction company and a store. In construction, revenue may fall for the following reasons:
If revenue has fallen in a store, this may be due to the following reasons:
- incompetence, as well as rude treatment of sellers;
- weak promotional activities;
- lack of “tasty” offers, various discounts, promotions and bonuses;
- narrow range of products;
- unreasonably inflated prices (in this case we are talking about stores designed for a wide range of consumers), etc.
Step-by-step instructions: what to do if your income level has decreased?
So, if revenue falls, the following steps should be taken:
- First, it is necessary to analyze the current state of revenue at the enterprise, as well as identify the degree of deviation of its actual indicators from the planned ones.
- It is necessary to understand the main reasons that caused the decrease in revenue. This stage is very important, since timely identified causes of failures in the enterprise’s activities will allow the necessary measures to be quickly taken to eliminate them.
- Having identified the main reasons for the decline in revenue, you should begin to select specific ways to increase it.
The following ways to increase sales income can be identified:
- reduction of production costs;
- increase in production volumes;
- conducting an effective advertising policy;
- entering new markets;
- expansion of the range of goods, etc.
- Implementation of specific measures to increase revenue. This stage involves:
- setting specific goals;
- control over the implementation of assigned tasks;
- analysis of the results obtained.
What not to do?
It should be noted that there are a number of prohibited techniques that are not recommended to be used when revenue is falling. Otherwise, the situation can only get worse. So, let's look at them in more detail:
To summarize, systematic decline in revenue is a serious cause for concern. At the same time, you should not make hasty decisions. First, you need to carefully analyze and weigh everything, and only then take specific actions.
Are customers in no hurry to visit your store or are they increasingly leaving without buying anything? It's time to think about the root causes of low sales. In our article we will look at the most common mistakes, options for correcting them, and ways to increase turnover in a store at minimal cost.
Reason #1: poor store location
In our “rating” of the reasons for low sales in a retail store, poor location occupies one of the first places not by chance. Experts are sure: it is the unfortunate location of the store that can reduce the number of visitors and customers many times over, and the right location for the store is the key to business success.
Solving the problem.
As you know, to open a store you need to choose the most popular places: transport stops, pedestrian streets, crossings. The rent of the most “passable” places is many times more expensive, but the likelihood of “being seen” is higher for such a store.
The closer the store is located to the central areas of the village, the more profitable it is - the intensity of consumer flows here is more powerful, but, as modern experience shows, a properly located store both on the outskirts of the city and in a residential area can become a “center of attraction” for visitors.
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Store placement rules:
- The store must be located so that people can see the sign and the entrance without spending time searching: you will simply lose visitors who will not be able to immediately find your store;
- If your store is located in the courtyard of houses or the entrance to it is not visible from the pedestrian sidewalk or roadway, it is very important to install bright, catchy, informative signs to the store;
- If your store is located in an unfavorable location in a shopping center (distant shopping rows, second, third line), signs and signage are also necessary: signs can be installed along the direction of the shopping center shoppers, starting from its very entrance;
- An important component is the availability of good parking at the store - if you can organize parking at the entrance to your retail establishment, it is possible that the number of visitors will increase;
- Pay attention to the entrance area of your store, the façade of the building, the area in front of the entrance - they should all be kept clean, the lawns and trees should be well-groomed and pleasing to the eye;
- Install a bright, unusual sign - it will also attract buyers. Also use large POS materials at the entrance to the store - pillars, jumbies, lightboxes, panel brackets, mobiles, pillars, acrylights, etc.
Reason No. 2: improper design of the storefront and sales area
A bright, properly designed display window not only attracts buyers, but also immediately “sells” the goods in absentia. Equally important in retail is the correct design of the sales area, because more than 70% of purchases are made spontaneously by a store visitor, which means that beautifully arranged goods, properly designed shelves, price tags and racks can properly influence the decision of your guests.
Solving the problem.
When decorating the display window and sales area of your store, pay attention to the following aspects:
- Products that need to be sold more actively and the most popular products should be located at eye level of the store visitor;
- Follow the main rule of merchandising - the rule of the “golden triangle” - a store visitor is attracted to three main points: the entrance, the display case with the most popular product and the checkout area;
- Customers in a store move counterclockwise, which means that this must be taken into account when placing goods, shelves, racks, and display cases;
- On display windows at the entrance to the store, it is better to place the most “traditional” and popular products, that is, what will a priori arouse interest among people passing by;
- Pay special attention to the lighting of the store window, the background, the overall concept, as well as its color scheme. It should be bright, eye-catching, maximally attracting the attention of people passing by;
- Update the models (products) on the showcase at least twice a month and remember that all items presented on the display must be in stock in the store or warehouse.
Reason #3: problems with the product range
The fact that your store has problems with the assortment of goods will be indicated by the fact that there are still a lot of visitors, but they are in no hurry to make purchases.
This may be due to various factors, ranging from the emergence of a competitor nearby or the introduction of government restrictions, to changes in demand, the emergence of substitute products or accounting errors.
Solving the problem.
If problems arise with the assortment of goods, experts advise once again to conduct an analysis and determine the segment of the store’s target customers: most likely, your assortment does not satisfy the needs of this category of people.
Your goal is to satisfy the needs of the majority of customers with your assortment. Today, there are several technologies for assortment analysis and assortment policy planning, and this is a really complex procedure that will require you to spend time and a certain amount of money.
The automation program Business.Ru Retail will help you track the loss of goods from the store. Use up-to-date data on sales and inventory balances to order new products.
Experts recommend conducting a marketing assessment and analysis of your store’s assortment at least once a year. Changing the range of products too often is also not profitable - it is difficult for buyers to “adapt” to such constant changes, especially since any new product must “show” itself.
Before optimizing the assortment, it is necessary to “weigh” and “evaluate” everything from an economic point of view: how profitable it is, how much money will have to be spent, when the break-even point will be reached, etc.
After conducting marketing analysis and economic calculations, the store owner will be able to easily analyze all items of goods according to all indicators, and then, based on the assessment results, identify the most popular, profitable items and make a decision on optimizing the assortment.
Reason #4: accounting, taxes and fines
If everything is in order with the assortment, there are customers in the store, and the revenue data does not correspond to traffic, perhaps an error has crept into the accounting. If a significant portion of the profit is spent on taxes or fines, this will be clearly visible from the financial statements.
Solving the problem.
If you have doubts whether the accountant is doing everything correctly, you can contact an outsourcing company that will conduct an audit and can take over some of the functions.
In addition, an outsourcer is usually more informed about the latest changes in legislation, and a large company that keeps your records usually has more experience interacting with government agencies during inspections. This reduces the likelihood of fines.
Tax optimization is a service that outsourcing companies often provide for free in order to demonstrate their competence to future clients. With its help, you can seriously reduce the burden of contributions to the budget.
Reason #5: Inappropriate atmosphere in the store
The right atmosphere in a store can evoke the right emotional reaction in a person and set him up for a purchase. This reason - the inappropriate atmosphere in the store - at first glance seems insignificant, but such an opinion is wrong!
It is the cleanliness of the room, the freshness of the air in it, comfort, the correct arrangement of shelves with goods, as well as the presence of a seating area, proper lighting, music, signs, beautiful price tags and decorative details that convey comfort - all this has a much greater impact on the buyer than low prices and a wide range of products.
The only difference is that we want to return to cozy stores with a good atmosphere again and again.
Create pleasant discounts and bonuses for customers in the Business.Ru Retail system. Promotions on goods can be done on a schedule, and you can also come up with a flexible system of scenarios for sales.
Solving the problem.
To ensure that the overall atmosphere in your store is favorable, first of all, pay attention to the technological layout of the store’s sales area. Determine the “hot” zones of the store - these are places, display cases, shelves in which goods are sold out instantly, and “cold” zones in which goods “stay” for a long time.
In order for “cold” zones to become “hot” there are some tricks, for example, the distribution of target goods in “cold” zones (for which people mainly come to the store to buy) and others.
It is also necessary to properly arrange shelves with goods and display cases in the store, think about the placement of shelves in space so that store visitors do not interfere with each other, do not crowd at the cash register, do not accidentally touch goods, etc.
Check the ventilation system in your store: the air in the retail space should always be fresh, the smells should be pleasant, and the temperature should be comfortable so that customers want to come back to you again and again.
The colors of the store's interior should be appropriate: warm colors have an active effect on customers, stimulate, invigorate, cold colors calm, balance, and encourage relaxation.
Reason #6: poor quality of service
According to retail experts, it is the human factor or, in other words, the incompetence of sales staff that often leads to a decrease in store sales and a deterioration in financial performance.
It is the sellers - consultants, salespeople, cashiers, cleaners and security guards - who are the “face” of the store, they are the ones who come into contact with customers, and it is their actions or inactions, behavior, politeness and accuracy that determine whether a person makes a purchase or remains dissatisfied with the quality of service .
Of course, today the importance of the actions of store personnel cannot be overestimated. According to numerous studies, the vast majority of customers today note a low level of quality of service in stores, and all this, of course, affects sales volume.
Comprehensive trade automation at minimum costs
We take a regular computer, connect any fiscal registrar and install the Business Ru Kassa application. As a result, we get an economical analogue of a POS terminal like in a large store with all its functions. We enter goods with prices into the cloud service Business.Ru and start working. For everything about everything - maximum 1 hour and 15-20 thousand rubles. for the fiscal registrar.
Solving the problem.
The most effective way to check the quality of service in your store is to conduct research using « Mystery shopper". Under the guise of an ordinary buyer, a specially trained person visits the store, who during the visit will give ratings on all points, from the quality of cleaning the premises and display of goods, to the seller’s reaction to a conflict situation.
As studies of “mystery shoppers” conducted among various stores show, only in 5% of stores did salespeople greet customers, and only in isolated cases did they say goodbye and offer to visit the store again.
In 90% of stores, the staff did not have badges. During the research, respondents noted the inadequate distribution of goods - they were most often piled up, which made them difficult to find, there was no information about new arrivals, many products did not have price tags, and the saddest thing was that store visitors could not get the information they needed about the product they needed.
In general, this method is recognized by marketers around the world as the most effective and efficient - it allows you to quickly identify organizational problems, shortcomings in the work of personnel, and analyze the internal environment of the store.
Based on the results of the research using the Mystery Shopping method, the store owner will receive comprehensive information and will be able to begin implementing measures to improve the quality of service. This, for example, provides training for staff in competent and correct communication with clients and behavior in stressful situations.
Reason No. 7: incorrect pricing policy
Many experts note that in conditions of the economic crisis, many retailers unjustifiably raise prices, betting that people will buy products and goods of daily demand, regardless of their cost.
Others, on the contrary, are afraid of “burning out” and begin to sell goods with generous discounts, which can ultimately lead to insufficient profits.
To eliminate such “distortions,” experts advise each store to develop its own pricing policy and strictly adhere to it.
Solving the problem.
Prices for goods need to be determined correctly: this will allow the store to become more competitive, capture a wider segment of the market, and the stability of work will increase.
In today's market economy, it is important to strictly adhere to your pricing policy, but it is worth remembering that pricing in a store is a multi-stage and difficult procedure.
It is necessary to determine the demand for goods, analyze costs and prices for identical goods from competing firms, select an appropriate pricing method, and only then can final prices be set.
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