Selling Cost = Salaries and Benefits / Sales

For example, say an employee earns $ 30,000 a year and he or she is generating $ 300,000 a year of business, then the selling cost would be:

300,000 / 30,000 = 10 % for every dollar the employee makes you in business you need to pay 10 cents of wages.

It is important to have all the employees in your business adding value and generating income. Any employee who is not doing that will harm your business and therefore you need to keep a watchful eye on your selling cost, it should not exceed 14 %. However, having said that, in order to have good people you need to pay them well and if you do not they will move and may end up working for your competitors.

Conversion Ratio = Number of Transactions / Number of customers

For example, say in a typical week 1200 customers walk in your store and 400 of those actually buy something ie produce a transaction at the cash register, then your conversion ratio would be:

400 / 1200 = 33 % on average a third of the people who walk in your store end-up buying something.

The conversion ratio also depends on:

• Location of the store (mall or street)
• Type of store, 24hr stores have high conversion ratios whereas specialty shops have lower conversion ratios.
• Capabilities of sales representatives.
• Store layout and clever display of items that attracts customers.

Average Transaction = Sale for a particular period / Number of transaction in same period

For example, your sales during the month of March were $ 60,000 and 2000 customers performed purchases, ie transactions, then the average transaction would be:

Average Transaction = 60,000 / 2000 = $ 30

The most important tool you can use to increase the average transaction is Suggestive Selling. This means that your sales representatives needs to understand customer needs and try and suggest items that complements the customer’s purchase or suggest alternative items. In order to do effective suggestive selling your sales representatives need to have very good product knowledge of item in the store and remember suggestive selling is not push selling. Push Selling puts customers off, this is a very important point to remember.

the number of items your customers purchase at any one time is another way where you can increase your sales. The main tool for doing this is suggestive selling. You need to have well trained sales representatives who understand the needs of your customers and have good product knowledge so that they can suggest other products to complement customer’s already purchased items.

Average items per transaction = Total items sold during a period / number of transactions in same period

For example during the past week we sold 2600 items out of your store to 500 customers, then

Average Items per Transaction = 2600 / 500 5.2