Sales Performance Evaluation
It is a good idea to on a regular basis to perform a sales performance evaluation. Reviewing how quickly you are growing sales and how quickly you should be growing sales is an important exercise to ensure your business is not conquered by your competition, especially large competing companies. If you are always growing faster then your competition then you never have to worry about being forced out of a market. On the other hand if you are growing slower than your competition this is a major cause for concern. If your competition grows faster than you they will be able to build economies of scale that will aid them in competing against you. Eventually these economies of scale could give them a large enough competitive advantage that they may be able to push you out of the market entirely. But how can you determine how fast you should be growing to ensure that his never happens? What is a realistic target to benchmark yourself against?
The best place to start is to look at your local economy and the industry within which you compete. Both your local economy and your industry is important as both will affect how fast you should expect to grow. If you local economy is shrinking by 20% but the industry you were operating in was growing at 5% it would be unrealistic for your business to be growing its sales at 5% per year. At the same time you will want to be aware of how fast your largest competitors are growing. If the market is declining at 5% but your largest competitor is growing at 6%, you will want to make sure you are growing at a minimum of 6%. By looking at these three factors at the same time you should be able to determine a fair growth rate you should aim to surpass.
For example my business operates in the Region of Waterloo. Recently a report was issued stating that Waterloo Region is the second best performing economy among Canadian urban centers. To read the full article titled "Waterloo Region Ranks Second Among Canada's Urban Economies" go to www.therecord.com. This article did not really give me much information though on how fast my local economy was growing. To find this out I needed to so do some more research.
After doing a little research I found a report from the Bank of Canada (The Monetary Policy Report), dated July 2011, stating that the Bank Of Canada expects the Canadian economy to grow by 2.8%. That means the city my business is located in (Waterloo) is probably growing at a faster rate than 2.8%. In order to understand how fast the economy of my city is growing though, I need to do a little more digging. In another report issued by the Conference Board's Metropolitan Outlook in February of 2011 it stated that it forecasts Toronto's economy to grow at 2.8% in 2011. Toronto was ranked slightly higher in the CIBC Metropolitan Economic Activity Index report that was referenced by The Record. This conflicts with the first report stating that Toronto is performing better than the Canadian economy on average but between the two reports I can see somewhere around 3-4% is probably the right growth rate for Toronto. Putting all of this information together I can probably assume the economy of the city my business operates in (Waterloo) will grow by around 3% if I use a round number.
But what about the industry I operate in? Is it growing at a faster rate than my local economy? Not all industries grow at the same rates. I could not find any projections but here is some information I was able to find. Consulting services grew in Canada at a rate of 3.2% from May 2010 to May 2011 as per the Gross Domestic Product At Base Prices By Industry Report from Statistics Canada. In another report from statistics Canada (Summary Statistics for Management Consulting Services 2007-2009) I was able to find that management consulting services grew on average by 5% in Ontario from 2008 to 2009. Using the same source but looking at the report for the advertising and related services industry (Summary Statistics for Advertising and Related Services Industry 2007-2009), I found that the advertising and related services industry grew on average by 2.7% in Ontario from 2008 to 2009. Given these two industries are the closest to which my business would fall under it is appropriate to look at these numbers.
If you are lucky enough to be competing against large companies that are publicly trade it would also probably be good to compare your sales growth to these companies. You will be able to find their sales growth rates by looking at their annual reports. Unfortunately in my situation, none of my main competitors are publicly traded companies. Therefore I was unable to use any of this information in analysis to set an appropriate sales growth number.
This means that at a minimum my business should grow at 3-5% in 2011, given both my local economy and the industries within which I operate are projected to or have recently grown at these rates. If at the end of 2011 I have not grown my sales by 5% I should probably look at getting help. The good news for me is that I have already grown my sales by over 5% this year. Given that I provide services to generate new customers, if my business was not growing at a fast rate that would be a major cause for concern.......
To get this kind of sales growth information for the location and industry of your business try the following sources
- local newspapers
- state/provincial or federal economy websites
- local business organization websites
- economic review web pages of financial institutions (Like this webpage CIBC Metropolitan Economic Activity Index for Canadian cities, although it does not have GDP or economy growth information it does have other good metrics like population growth, employment growth, unemployment rate, bankruptcy rate, housing sales, housing starts and building permits which can help you come to an estimate of whether your local economy is growing or shrinking)
Another great way to stay on top of how fast your local economy is growing is to set up an alert in google alerts for something like "Your City Economic Growth" or "Your City's Economy". You can do the same for the industry that you operate in and your major competitors. Google will then send you automatically any new pages posted to the web with those terms. If anything is posted about your local economy, industry or major competitors you will get a notification. This is a great way to stay up to speed.
Key Insight
Having an idea of how fast you should be growing based on the growth rate of your local economy, your industry and your competition is a great way to benchmark. If you are growing slower than your local economy, competitors and/or industry it might make sense to look for help with your marketing and sales. If you consistently are growing slower than your economy, industry or competition you will eventually be forced out of business. On the other hand if your business is growing faster than your local economy, competitors and the industry you operate in, then you should feel good that you are doing a good job of managing your marketing and sales. Without an idea of how fast you should be growing it is impossible to determine if you are doing a good job, if your company is at risk or if you should seek assistance with your marketing and sales. I would highly recommend every business owner conduct a sales performance review at least once a year.
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My name is Chris R. Keller. I work at Profitworks Small Business Services helping various B2B small businesses in Waterloo and Kitchener Ontario generate new customers. If you are interested in generating new customers for your B2B small businesses enter your email in the box provided below and click the "Send Me Free Updates" button.
I hope this article on sales performance evaluation was a interesting to you. Thanks for reading.
