Financial

Two Important Metrics for Brick & Mortar Store Owners

If you don’t know your numbers, you don’t know your business.

I know math is not the favorite topic for many brick-and-mortar store owners.  But tracking and monitoring metrics for brick and mortar store owners is SO important – especially if you want to grow.

As retail business owners, there are quite a few metrics we can calculate and track.  In this blog post, I’m covering three of them.

1. Average Sale or Average Transaction Value (ATV)

Also know as Average Order Value. Calculating this will tell you how much, on average, your customers spend with you.  Most Point-of-Sale systems provide this information on your dashboard but if not, here’s how you can calculate it yourself:

Total Revenue / Total Number of Transactions

Here’s an example: if your store generates $300,000 in annual revenue and you have 6000 transactions for the year, then your store has an ATV (Average Transaction Value) is $50.

I’m sharing the example so you understand the formula, not necessarily to use this example as a barometer for your own business. There are different “averages” depending on the type of retail business you have.

For instance, someone selling furniture with higher profit margins will most likely have a higher ATV (Average Transaction Value) than a general gift shop.

Once you calculate this, I recommend you track this every year to see if it goes up or down.  The goal is to increase it, especially if it seems low to you.  You can either increase prices, find better priced products so you can increase your margin or you can get creative with selling. If you want ideas on HOW to increase your average sale, listen to Episode #4 of the Savvy Shopkeeper Retail Podcast.

2. Sales Per Square Foot (SPSF)

SPSF is an indicator of how efficiently a retailer uses its assets (merchandising, floor layout, salespeople, etc.) to make sales. So, the higher the SPSF, the better.

In order to calculate your SPSF, you want to make sure that you don’t include the square footage of fitting rooms, offices, storage areas, etc.  

You need to know two things:

  • The square footage of the actual retail area of your store
  • Your annual revenue from that retail space

Here is the formula:

Annual Revenue / Square Footage

If your store generates $300,000 in annual sales and the retail square footage is 1,000 then your SPSF is $300.

Again, don’t panic if your SPSF is much lower.  This is just an example, using nice round numbers.  

Publicly traded retail businesses report their SPSF but Independent Retailers do not, so it’s hard to find numbers for us to gauge if we have a “healthy or comparable” SPSF.

In 2018 I conducted an informal SPSF survey within our community and found the numbers varied but the average for those that completed the survey was around $150 SPSF.  I want to stress that this research was truly informal but helpful! Click here to read the series of articles I wrote about it and if you want to complete my updated 2021 SPSF survey click HERE.

Once you calculate your SPSF you’ll want to know how to increase it. 

Here’s a list of ideas on how you can increase your SPSF:

  • Increase prices
  • Get creative with store promotions
  • Increase your ATV (Average Transaction Value)
  • Train your team to sell better and/or sell more
  • Encourage people to stay longer in your shop
  • Make improvements to your store layout
  • Optimize the categories of inventory that are doing well in your store

In a future blog post, I’ll talk about KPIs (Key Performance Indicators) because after you start tracking metrics, you’ll want to start implementing KPIs in your business.  

Personally, the term KPI was always intimidating to me.  Prior to opening a retail business with my sister, I never worked in retail before, so this term was also foreign.  If you’re in the same boat – I get it!  I want to gradually introduce the financial aspect of running a retail business to you so it isn’t scary or intimidating.  

Metrics are your “business as usual” measures – these still add value to your organization but they don’t involve setting actual goals around those numbers and they aren’t the critical measure you need. Key Performance Indicators help define your strategy. I’ll be sure to share more on this in the future.

If you have metric-tracking and KPIs covered in your business, I’d love to hear from you!  Please comment below and share one KPI or Metric that you track and how it’s helped your own brick and mortar business.

If you want MORE valuable information like this, listen to the Savvy Shopkeeper Retail Podcast and visit the Shopkeeper’s Academy where I share even more information in our group memberships!

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