A Step-by-Step Guide for Small Business Owners
by Andrew Ferris
Introduction to Sales Analysis
As a small business owner, diving into sales data might seem overwhelming, but it's a goldmine of insights for your business growth. Let's break down this process into manageable, actionable steps.
Step 1: Gathering Your Data
First things first, compile your sales data month by month. If you’re not a spreadsheet wizard, don’t worry. Excel or Google Sheets are quite intuitive, and there are plenty of free templates online to get you started.
Whether you use Square, Wix, Shopify or something else, you will be able to find your sales data in your dashboard. Don’t feel bad if you have to Google something like, “how to find sales report on Square”. I do it all the time and I use it all the time. Once you have it, download it as a spreadsheet.
Spreadsheets can be very complex - but I tend to use =SUM(value:value) and =AVERAGE(value:value) more than anything. I like to break things down month to month. Usually you can also do this in your Point of Sales software, but I like to have in Spreadsheet form so I can manipulate the data as I see fit.
Why It's Valuable: This foundational step gives you a bird's-eye view of your sales trends. Over time, you’ll start to see patterns - peaks and valleys - that are crucial for understanding your business's performance.
Expert Tip: Make it a habit to update this data regularly. Consistency is key in building a dataset that offers reliable insights.
Step 2: Identifying Sales Peaks
Now, let’s look at your highest sales months. Think about what might have influenced these peaks. Did you launch a marketing campaign? Offer a seasonal promotion? Introduce a new product?
These will be educated guesses since you can’t read your customers’ minds. That said, you can get pretty accurate here. If you sell ice to passersby, Summer is probably you busy season. Take things like that into account. Your products and services may appeal more and less at different times of the year. Photographers and landscapers will know this all too well!
I like to look at my peak sales day in the month and then look back on any ad campaigns I did to see if there was a correlation. Did I do something different to my SEO? Website? Did I attend an event? Think back to what could have produced a result or at least influenced it.
Why It's Valuable: Pinpointing what drives your best sales months is like finding a secret recipe. Once you know what works, you can replicate these successes.
Practical Tip: Keep a separate log of your marketing activities, product launches, and any significant external events. This log will be an invaluable reference when you’re trying to correlate these with sales spikes.
Step 3: Assessing the Lows
On to the less exciting part – your low sales months. Look for patterns. Was there a holiday that might have impacted sales? Did you face supply issues?
Just like the ups, there are reasons for the downs. I like to remind business owners that they are part of a market and the market’s demands change. You may have the best product in town and be the dominant force in your city, but if inflation is high and people are staying home, you will feel that too. When I identify really low lows, I like to search what market trends were in that month. Maybe there was something there.
Maybe not! Apart from what isn’t in your control, there are some things that are. Did you do any marketing? Did you have a cool new concept that fell on its face? Did someone leave you a bad review and discourage new business? You can certainly address these and plan to change one or more components to your business to see those low points rise!
Why It's Valuable: Understanding the ‘whys’ behind your low sales periods is crucial. It helps you anticipate challenges and plan better for future downturns. Bonus: you’re also understanding your audience even better.
Actionable Advice: Create a contingency plan for these low periods. This could be diversifying your product line, ramping up marketing efforts, or exploring new sales channels.
Step 4: Analyzing Product Trends
Which products are your stars? Which are the duds? Your sales data will tell you.
Also, don’t resist it! Why would you resist your best-performer? As your business matures, you will clarify your niche in your market. If your Cookie Baking Class is always slam full but your Cake Decorating Intensive is frequently empty, take note of that. Then build plans around it!
Why It's Valuable: This analysis helps fine-tune your inventory, focusing on what your customers really want. It's all about optimizing your offerings to match customer demand.
Smart Tip: Don’t just look at the 'what' – try to understand the 'why'. Customer surveys or feedback can provide insights into why certain products perform better than others.
Step 5: Crafting Your Action Plan
Armed with all these insights, it’s time to plan. How can you amplify your peaks and mitigate your lows? What products should you focus on?
And it’s as simple as a blank piece of paper or new document and a calendar. Sure, you can use planning tools (I personally enjoy Notion); but those are upgrades. Put in the work from the above steps and write down your plan. Bust out the calendar and map out what did well and what didn’t and your new strategies.
Why It's Valuable: A strategic plan based on hard data puts you in the driver’s seat. It’s about making informed decisions that align with your business goals.
Key Strategy: Use a calendar to map out your promotional activities. Align them with your historical sales peaks and consider trialing new strategies during traditionally low periods.
Conclusion
Sales analysis might seem complex, but with a structured approach, it becomes an invaluable tool in your business arsenal. Remember, the goal isn’t just to collect data, but to translate these numbers into actionable business strategies. Start small, stay consistent, and let your data guide you to smarter business decisions.
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