Continuing the series about helping you conduct an annual review of your finances, here is the fourth installment by Ellen O’Hara, Cockpit Arts, Head of Business Development at Cockpit Arts.
In the first three posts of this series, we’ve looked at assessing overall performance, gross and net profit margins, and how these might change over time.
But to get a real insight into what’s driving change in your business however, it’s important to look at your income and expenditure in a little more detail.
So in terms of sales, it’s useful to ask yourself:
- What percentage of my turnover comes from the different activities I undertake, such as commissions, direct sales, online sales, wholesale orders, licensing, teaching, freelance designing or making etc.?
- Which are my best selling products in terms of volume of sales and value of sales?
- Who are my best customers? Think about who provides you with the most repeat business, who pays on time, and who provides you with the larger value orders.
Note from MyCake: if you are one of our many users you can use the income and expenditure reports under tools to assist in this analysis. You can also evaluate customers payment time from the customer page, selecting the customer and then looking at the ‘invoices, quotes & stats’ tab.
Now consider how has this changed over the years and why? Has the nature of your work changed? Have you engaged in different marketing and sales activities? Have you moved from being a part time to a full time maker, or vice versa?
This exercise should help to highlight where some of the opportunities are for your business and what you need to do more (or less!) of to maintain or grow sales. For instance, you may notice that particular product lines or collections are outselling others, or that online sales have been continuously improving over time. This should help you to decide which stock to hold or which sales routes to focus on in the future. You might notice that the majority stockists have only ordered once, so you may decide to do more to encourage repeat business.
Similarly, it can also help highlight some of the risks you might be exposed to. For instance, a large percentage of your income may be generated from one source (e.g. a particular customer or show), which may represent a risk.
So what does your sales analysis tell you? Let us know what you have gleaned and what you plan to do differently this year.