Four indicators that should not be emphasised

Oise Trade company

Many entrepreneurs focus on turnover and compare themselves with their competitors based on it. However, the amount of turnover may simply be the amount of money that comes in and out of the company.

Running a business without analysing its financial performance is a straight path to failure. In economics, there are a large number of metrics by which you can judge a company's performance. It is quite difficult for a newcomer to understand everything at once and to identify the main indicators for themselves. Often they focus on those metrics that do not play a big role in business development. Oise Trade dropshipping told us about these metrics.

Turnover and amount of sales

Let's imagine a situation: a client has paid you an advance payment, but you still need to work it off. This will take time: one or two or three months or even more. Therefore, the amount of money coming into your company is just money coming in. It does not tell you anything. You may not be able to fulfil your obligations and the money may have to be returned to the customer.

Another metric that entrepreneurs like to compare themselves to others is the amount of sales. However, many don't take into account sales performance. You may have sold a million euros, but made no profit, only covered your costs. You should not analyse turnover or the amount of sales, but net profit and profitability.

The second useless indicator is the total amount of money in your accounts. If you consider this indicator only at a given moment in time, it will tell you nothing. Today you may have a million and tomorrow 100 thousand. What will this amount tell you? Nothing. You simply have money today, and tomorrow you will not have it. You should analyse this indicator in dynamics. If it grows from month to month, that's great. If it decreases, you need to find the reasons and eliminate them. Otherwise, at some point the money will run out and your company will go bankrupt.

Total amount of money in the accounts

This indicator should also be considered in dynamics. If revenue is growing, it may seem great. However, what really matters is the relationship between the indicators: what happens to net income and profitability when revenue grows. If both revenue and profit are growing, that's good for the business. If only revenue is growing and profit is decreasing or unchanged, it is worth thinking about what you are doing wrong, recommend the managers of Oise Trade Limited. Only by looking at revenue together with the company's other financial indicators can you understand the overall situation.

Revenue

If you are not a big company like Amazon or AliExpress, market share is just a potential for growth. You need this indicator to determine the place of your business in the market among competitors and to assess the effectiveness of the actions you have taken. For example, you have compared yourself with other players in the market and realised that you currently occupy 5% of the market, a year earlier this figure was 4%. This means that you are moving in the right direction and have room to grow and develop. If the indicator does not change and you realise that it is very difficult to sell something on this market despite the fact that you have already used all the methods, it means that the market is occupied. Actually, these two conclusions are the maximum information that can be obtained from market share analysis.

Oise Trade experts suggest looking at such indicators as:

average cheque compared to competitors;
margin: how much you earn from the sale of each product;
the number of sales of similar products from competitors;
cost per customer attracted.

We will talk about these and other important and useful metrics in the next posts on the company blog. We have already written about one of them earlier. You can read this article at the following link: https://oisetrade.pl/en/blog/the-importance-of-ctr-in-e-commerce

Market Share