Average Ticket Size

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Average Ticket Size

The average ticket size is the average dollar amount of a business’ individual sales.

Sometimes it can be referred to as the AVT or “Average Value Ticket.” When establishing a new merchant account, this value needs to be determined.

Payment processors use average ticket size to predict how much of a risk the business is to the processor. The higher the average ticket size, the higher the risk.

Sometimes it is difficult to establish this if the ticket sizes vary widely or if the business is just starting out.

How to Find the Average Ticket Size

To get an estimate of this value, simply divide your total sales amount by the number of transactions, usually in a one month period.

For example, if you sold $5,000 worth of goods and had 23 customers, your average ticket size would be $217.39.

It is important to consider, especially as a new business, that customers often spend more when using a credit card versus when paying cash. This will increase your average ticket size estimation if you are a new business without much sales data.

Why Does it Matter?

Payment processors put an emphasis on this value because of the potential for chargebacks, or having to reverse a credit card charge.

Credit card associations can impose fees and sanctions if there are too many chargebacks or if they exceed a percentage of transactions.

Usually, cardholders have more invested in large dollar purchases and so, the likelihood of a chargeback occurring increases.

Put simply, if you are unhappy with a $10 product, you are likely to let it go and not demand a refund. If you shell out $2,000 for something, you are more inclined to ask for your money back if you aren’t satisfied.

Also, these companies usually have fewer transactions, so just one chargeback can greatly affect the company's bottom line.

Overall, companies that have higher average ticket values carry a higher risk.

Using Ticket Size to Help Your Business

It’s valuable for business owners to keep an eye on this statistic.

For example, your overall gross sales may be the same year over year, but you may notice that your average ticket size has decreased. This may indicate that you have more customers overall, however, they are spending less per transaction.

Conversely, you may find that you have fewer customers, but they are spending more per transaction when they return for additional purchases.

Following trends like this may help you design marketing campaigns that help you reach your business goals.

Do you need to find more customers or have your existing customers spend more? Ideally both!

Some simple tactics to increase ticket size are offering volume sales promotions, cross-selling additional products, or offering a wider variety of items. It is easier to get a current customer to purchase more than it is to find a brand new customer.

Average Ticket Size as an Indicator of Success

Often, large retail companies may report out this figure as an indicator of overall company health.

For example, both American Express and Home Depot included these year-over-year figures in their annual reports for shareholders. Usually, an increase in average ticket size is a positive indicator for companies.

Metrics Guide Businesses

Successful businesses know their key metrics and allow the data to inform their business decisions.

Being aware of your average ticket size can help you grow your sales and take your business to the next level.

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