Dig A Little Deeper To Really Understand Your BusinessJanuary 11, 2017 (0 comments)
By Dan and Lori Askew, Vantage Group
La Costa, CA--Numbers explain so much about our business and they tell a story – but don’t be misled. Often, an overall view of a business’s numbers does not tell the whole story. You must look deeper. Good footing for 2017 can be derived from 2016’s history. Whether it’s the beginning of your fiscal year or not, the calendar year is always a good opportunity to recap and regroup.
Here are a few key areas we suggest you examine, not just on the peripheral l but to dig a little deeper to see what’s really going on. Each of these aspects can appear one way yet with further examination may tell an entirely different story. We suggest you run this exercise for two time periods, one being fourth quarter and the other the past calendar year. You may indeed find discrepancies between the two that may cause you to rethink your plans for the upcoming year. The most concise way to approach this exercise is a quick (even hand written spread sheet). You will be comparing 2015 and 2016 both fourth quarter and the calendar year on several levels. Your spreadsheet could look something like this:
Now that you have filled in your chart, let’s ask a few questions to get you started. How does the financial health of your business compare to this time last year? Have you made improvements on paying down debt? Have you increased your sales? Have you increased your gross profit? Why or why not, and how?
Regardless of all the economic stir and political banter of this past year you should remain on a trajectory of improving the health of your business and all factors do play together. If your sales were down, did your gross profit improve? Did you cut back your advertising to save on expenses and your traffic count dropped as a result? These are the deeper questions that should be asked and acted upon so 2017 will show the improvement you seek.
How’s your turn rate? (Calculated for a one year time period by dividing your costs of goods sold by average inventory). Although the industry average is only a one-time-turn we believe this is no longer an acceptable healthy rate (unless of course ‘average’ is your goal). How will you improve it this year?
These factors are the most obvious in affecting your financial position, but it’s the elements that play into these that are the true driving forces.
The following are key components that need to be explored to see how they are playing into the bigger picture.
Turn Rate. Turn rate can easily be affected by the date of your inventory. Break down your sales by age of the product. You will most likely find the large majority of your sales came from newer merchandise. Hopefully, you had older merchandise on sale and moved a good portion of it - so keep that in mind as well, so as not to skew your thought process.
Look at your inventory assortment today by percentage in each age category. If you want to see significant improvement – complete this process by category of merchandise as well. Are you sitting with a high percentage of older inventory than your sales were for both time periods? (Fourth quarter and Last year). If so , make the adjustment now, replenish those fast sellers, don’t wait for the vendor to call, restock to get your inventory balanced or you can plan on your turn rate dropping.
Advertising. This is the perfect time of year to recap your advertising efforts. If you haven’t already done so, you should create a simple form to keep track of advertising/events, their cost and the yield. This form should also include thoughts on what you should or would do differently in the future. Of course, attach a copy of the ad or invitation to it. (Much can be forgotten in a year). This debrief will keep you from repeating mistakes while making future events more successful.
Human Resources. This is often the most difficult area to undertake. We get attached to our staff, we appreciate their efforts and loyalty and often know of their personal life situations. Nonetheless, sales goals need to be set and met. If an employee’s sales are lacking, first offer them the opportunity for additional training and a time frame for improvement. A good exercise for January is to have individual meetings with staff members so you can communicate your expectations. Whether it is sales, customer contact, display abilities, being on time etc. If your expectations are not met, a change needs to be made. For the health of your business.
These are just a few of the many factors that play into the overall health of your business and developing good footing for a prosperous 2017. We wish you all the best in the upcoming year.
After decades of experience with both national retailers as well as independent chains, Dan and Lori Askew of Vantage Group apply their expertise to assisting the independent retailer and manufacturers in the jewelry industry. They closely examine each area of business and address those in the order that will make the greatest impact in the most time efficient way to grow business incrementally while avoiding common pitfalls. Vantage Group's commitment is to insure overall success through cash flow, merchandise planning, inventory control, advertising, and store management, by partnering with the client either from the beginning or at any point along the way.