Business Health Indicators What numbers should I be looking at? What are they telling me?

Weekly #’s to Track These numbers show you your strengths and weaknesses in sales. They help you focus on areas that need improvement. Conversion Rate = # of transactions / # of people that walk in the door ◦ Tells you how good you or your staff are at greeting people, making a sale Cross Sell: # of items sold / # of transactions ◦ Let’s you know how good you are at adding on extra items for sale Average Sale / Customer = Total Net Sales / # of transactions Hourly Revenue / Staff = $ they sold that week / # of hours they worked that week ◦ Helps you see how much each person is selling

Monthly #’s to Track Sales COGS = Costs of Goods Sold = what we pay Avon for stuff Gross Profit Margin = (sales – COGS) / sales ◦ Should at least be over 50%, can get up to 70%+ with LABCs Expenses = all those other costs ◦ Helps you see where you might be able to cut costs Net Profit = Sales – COGS – Expenses ◦ It’s nice to know if you’re making money and how much that is

Key Financial Indicators: Profit & Loss (aka Income Sheet) Gross Margin ◦ Percentage of gross profits on sales AFTER deducting COGS but BEFORE deducting expenses (should be increasing over time) Overhead as percentage of sales ◦ Overhead is what makes up your general expenses ◦ Look at percentages, not dollars. As your business gross increase, the dollars spent on expenses will likely increase, but the percentage should be decreasing ◦ Identify and keep an eye on your largest expenses as a percentage of sales : salary and rent. ◦ My memory is a little fuzzy here, but I think both rent and wages should be around 15%. Wages might be a little higher, but shouldn’t be over 20%.

Key Financial Indicators: Balance Sheet Current Ratio ◦ Measures business liquidity ◦ Good indicator of cash flow problems ◦ Current Assets/Current Liabilities ◦ The number will be between 2 and 1 ◦ The higher, the better Debt to Equity ◦ Measures what you owe to what you own ◦ Total Liabilities / Net Worth ◦ The lower the ration, the better Inventory Review ◦ Inventory Turns = COGS / inventory level ◦ Days of Inventory = 365/Inventory Turns ◦ 4 – 5 turns a year is good for LABCs ◦ At 50% GPM, with $100,000 in yearly sales, $10,000 is a good level of inventory to have on hand, too much more than that is cash tied up on a shelf Compare last year’s numbers to this year’s numbers for trends and to compare to industry standards (our NAICS code is