Essential Training & Development Modules | Black Kettle Catering Consultant
Management Support | Training & Development
Sales Mix Analysis | Business Module No1
I am surprised by the number of blank faces I see asking a business manager for their sales mix analysis.
However I am always delighted when I train this initiative and see an increase in profitability as a result. The most successful owners and managers I know carry out a sales mix analysis on a regular basis. They draw up an action plan from their findings and implement it for greater or continued success.
At the age of 19, I was keen to lean and taught well. I had to work out my sales mix and sales mix profit contribution by product, by category. Furthermore, explain what the increase or decrease in margin was week on week, month on month and why. All done with a pencil, calculator and an eraser (of course).
Every week I looked forward to conducting my sales mix analysis. It was an essential part of my commercial management.
A simple investment of time can bring a profitable return.
A sales mix analysis is as important for independent cafes as it is for contract caterers or branded food chains. A number of high street chain brands will be using a sales mix analysis on a regular basis. It will be a fundamental part of their business management.
Knowing what to do with the knowledge you glean from conducting a sales mix analysis is so important. I struggle to think of many other financial business practices that are more important.
The emphasis here is on analysis not data collecting. The data could come from a back office system, menu management software, EPOS or till, you can collect the data manually and put together an Excel spreadsheet if need be.
Having a system in place does not give you the answers on how to run your business.
You should know what your sales mix is on a regular basis and conduct a sales mix analysis twice a month, depending upon the number of products you sell. Additionally, you should have a list of actions to review and to implement following every analysis.
It is essential to undertake a review of your entire product range, cost price, sales price (inc VAT or ex VAT and if take away pricing is applicable) and know your sales so you have the data needed for the analysis. You can still conduct an analysis without EPOS or back of house operating systems; it will just take a little longer to gather the information. This is just a challenge not a show stopper.
Understanding how your sales are made up by which products and product categories by volume | the mix
Understanding the percentage of sales of these products and product category and their individual gross profit achievement | the analysis
Using these two pieces of information together allows you to complete your sales mix analysis.
Your overall gross profit is dependent upon the gross profit of each individual product. You will have different products with different gross profit achievement within the same category. i.e. cold drinks. Therefore you have a sales mix within a category and each category’s profit achievement can be measured.
Do you know what categories you have and what percentage of sales those categories make up of your overall sales? This is basic management information (MI), but it is often missing even in a business with intelligent back office systems and EPOS. We occasionally find that back of house systems and EPOS are not always set up properly to give you the MI you need to make analysis simpler and therefore easier to drive your business forward.
So how do you now use your sales mix analysis to increase your profit margin? Well this is where we can help and advise on a one to one or group basis. It is something we have done in every business we have operated or worked with, with great success.
Please do not underestimate its importance in allowing you to get right under the skin of your business and enabling you to make informed business decisions to increase your profitability.
Real success can be achieved by implementing the sales mix analysis into your business as an essential practice that you plan and carry out on a regular basis. You can conduct a one off review and achieve increased profitability, but if you can do this once why wouldn’t you do it more often? You may be surprised at the results and how well you get to know your sales and your business.
Craig Fettes | Black Kettle
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