Business efficiency is always known as the ultimate destination in every store’s business. Because in simple terms, a store that cannot manage and evaluate business performance will not be able to come up with suitable improvement policies to increase sales, sales and optimize management for the store. mine.
So what is business efficiency? Which indicators are assessed based on and how to best improve business performance? Let’s find out with Onlinemoneytake in the sharing below.
1. What is business efficiency?
Business performance is a concept that is measured in many different ways such as the rate of return, rate of return or revenue earned per employee, … Business performance reflects the ability to use resources to achieve the business goals set and maximize profit for the store.
Based on this, efficient stores can create products and services and accomplish the target with minimal cost effort. That is why the assessment of business performance is an extremely important factor that business owners need to understand.
Business performance is assessed based on optimizing many aspects of business
Along with that, the ultimate goal of a business model is to generate revenue and profit. Therefore, business performance is also evaluated based on the source that the store can generate with a certain input resource.
A business model that fails to properly allocate and regulate resources runs the risk of being defeated by competitors and significantly reduced business performance. This is one of the leading reasons why your store is in danger and your business fails.
2. The reasons for ineffective business
Many people believe that the harsh competition of the market is the leading reason that the store’s business falls into an alarm situation. However, in fact, the root cause comes from within is the main reason that directly affects the business performance of the store.
2.1 Mistakes in orientation
It is not all of a sudden that market research and analysis is considered to be one of the top factors that come to mind when starting a business plan. Having a clear orientation based on research and evaluation will determine the feasibility of your business. Make sure your product/service can meet the real needs of the market you are targeting.
2.2 Unable to control costs
This is a factor most problematic stores have. Businesses need a lot of costs for each segment, different factors. Therefore, the appropriate balance and payment is essential to be able to balance the cash flow.
Cost is always the top factor that business owners need to consider and balance.
Start by reassessing all your spending resources, optimizing and eliminating unnecessary operating expenses to streamline your storefronts.
2.4 No good pricing strategy
Price is one of the factors that determine the store’s sales. Along with that, this is also considered one of the reasons why users make buying decisions. Therefore, it is absolutely impossible to be sloppy in pricing products.
Always consider all factors such as: entry price, market price and all kinds of shipping costs, advertising, … to ensure your price is not too “heavenly” but also cannot break even. or even a loss with every product you trade.
2.5 Can not optimize employee’s working performance
Have you ever thought that you are paying too high / too low for what your employees do? Unlike a corporate business, the store’s retail business model often doesn’t pay much attention to employee performance optimization.
That is the reason that many business owners often spend a lot of money to hire many employees, instead of optimizing the performance of their jobs. Start by scheduling training and coming up with the right salary policy to give your employees more direction and motivation to improve their performance.
3. Criteria to evaluate the business efficiency
3.1 Conversion Rate
Conversion rate is considered one of the leading factors that help evaluate the business efficiency of the components in the store, helping the business owner to offer better-improved activities.
This index at a store is often evaluated based on Number of customers/leads.
For example: In a month, the total number of customers coming to your store is 2000, and 500 of them become your customers, the conversion rate is: 500/2000 = 25%.
At this point, based on other types of expenses, you may be able to calculate the full amount to convert to 1 customer. From there, evaluate the business performance of the store more accurately.
Your conversion rate can also tell you how more likely you are to know viewers turn out to be buyers. Driving store visits is great, but just the number of customers who visit without making a purchase won’t have much of a positive impact on your business bottom line.
Conversion management is the best way to find problems and improve business performance
To improve your store’s conversion rates, start with your employees. Make sure you can ensure effective training and empowerment so your employees can build customer trust.
This can completely help your staff become a consultant to bring customers the most useful information about the product.
3.2 Sales per employee
Sales per employee is an extremely useful measure when you arrange work shifts or evaluate an employee’s overall business performance. You can easily evaluate with the formula:
Net revenue / Number of employees
This is one of the indicators that help you make better hiring decisions, save maximum time and improve recruitment efficiency for your store.
To improve this metric, there is no more effective way than to set a clear sales goal for each employee. You can rely on the employee’s monthly results to set the KPI that’s right for each person. With that, always invest in training and motivating your employees to work more efficiently.
3.3 Average transaction value
This is an indicator that helps you see how much on average consumers spend on your store. The average purchase amount is higher than the average price of your products meaning shoppers are buying multiple high-value products in your store or buying in bulk.
When the average amount is lower, you need to reconsider your pricing or come up with other sales plans such as deals, combos, … to make customers spend more on your store.
3.4 Growth index for each period
You cannot maintain your store if your current sales are even lower than in previous periods. With the exception of external factors in which every store is affected, always make sure your business is getting better, instead of stalling or more dangerous than in the past.
Typically, this metric will be calculated by:
(Current period revenue – Previous period revenue) / Previous period revenue x 100
Or business owners can specifically track business performance right in the reporting system of smart sales management software. This also ensures greater accuracy, as the lack of transactions in the traditional recording can lead to confusion.
To improve this metric, try to find out what problems your store is facing like cost, tastes, changing markets, number of customers coming to you, or efficiency of operations. broadcast, … to make more suitable adjustments.
3.5 Quantity of goods sold
Evaluating the index: Number of goods sold / Total initial quantity x 100 will help business owners evaluate the selling speed of a product, thereby making a better buying decision. .
Example: You have a lot of new shoes imported and you realize that you sold 80% of the stock in just 1 week. This selling speed is considered unusually fast for your store. At this point, you need to come up with a reasonable import plan in order not to cause out of sale problems.
There are many ways you can control this is inventory management with the sales software. Smart sales software will help you to control all of your inventory. At the same time update the amount of inventory according to each arising transaction. From there, it helps you keep track of your low stock and plan to import accordingly.
With this metric, a high sell-out rate means you may need to stock up on stock (unless you’re intentionally selling out). On the other hand, a too low sell-out rate means that the consumption is not good enough and you need to find a way to sell more to increase the business efficiency of your store.
4. Solutions to improve business efficiency
4.1 Warehouse management
A tidy warehouse with proper management can save you maximum time searching and the risk of running out of stock. Not only do the sales go smoother, but it also makes it easier for your employees to check items.
Warehouse management is a factor that helps to effectively manage general operations
In particular, with effective management software, you can completely keep track of where your goods are currently and the actual inventory of these items. From there, you can come up with import policies that match your actual sales capacity and inventory to meet your sales requirements.
4.2 Simplify and redeploy the store
Make the most of your store so that customers can easily move and find products. Products should be clearly divided and distributed for easy management and for better-related product search.
If you are more careful, you can place signs that are easy for customers to identify and stimulate their needs. This can completely increase sales passively for your store and improve the best business performance.
4.3 Process optimization
The process here is understood as the sales process, a good sales process means to help customers save maximum waiting time, pay for your purchases but increase the time to visit and shop. This will be based on the layout as well as possible programs to stimulate buying demand.
Always make sure you have all the necessary equipment available so that customers can pay easily and do not have to wait too long. Along with that, you can equip your store with the most useful software to manage customer information, help take care of customers as well as build programs for each customer to stimulate demand. fruit.
4.4 Improving the quality of staff
Employees are one of the most important factors in increasing productivity and improving conversion rates for your store. That is the reason why it is so important to train employees regularly and follow a clear path.
Let’s start by helping employees understand your product because this is a prerequisite for employees to be able to advise and close more easily.
An indispensable factor in every training session is how to satisfy customers with their own products. This does not mean that you say bogus, but it means to listen to your customers, listen to what your customers want instead of talking too much about what you have.
And do not forget that customer care during and after-sale is extremely important to increase the number of loyal customers for your store.
4.5 Apply technology in the trading process
Depending on the business model, the shop owner will choose a suitable form of business management such as books, excel files or sales software. However, in reality, the traditional business management method will only fit with relatively small business models, a small quantities of goods, and no employees.
And of course, always having to remember to fully update transactions occurring during the day to calculate at the end of the day, at the end of the month is extremely laborious, time-consuming as well as a lot of confusion.
That is the reason that smart sales software is gradually becoming the choice of many businesses because of its special features that help optimize the operation and manage the store easier.
For each store, the sales software will help business owners speed up the payment and payment operations, helping customers not have to wait too long. Especially, with multi-item stores, many employees, you will not have to remember the price of each item thanks to the data system stored on the system.
Managing goods and inventories is considered one of the features that bring about great effects to business owners. Because detailed tracking of the quantity of each product and updating each arising transaction will help the business owner to control the goods in the best way. From there, make reasonable and timely import plans and best evaluate the business performance of each item.