How may gross profit dollars, which are available to your operation, never reach your bank account? Retail businesses have a number of potential leaks of gross profit dollars. To effectively minimize the financial damage these leaks do to your operation requires: Identifying the total value of the leaks. This simply requires measuring the actual retail value of the product sold weekly compared to the potential retail value of that product. Defining which departments are contributing to the losses and to what effect. Defining what is causing the leak in each department. Establishing controls to minimize the losses. Assigning accountability for implementing the controls. Establishing follow-up processes to measure the effectiveness of the controls and to make adjustments as needed. Some of the more common causes of gross profit leaks are: Pilferage - One person, whether an employee, vendor or customer, can do a lot of financial damage in a short amount of time. Inaccurate Sales Forecast - Over-ordering of product with a short shelf life or highly perishable products can force excessive markdowns to move product. Excessive Ad Markdowns - There is a price point on an item at which you will achieve optimum sales. Reducing the price on an item below that price point simply reduces gross profit without any financial benefit to your business. Slow implementation of price changes - Some examples of when this occurs include: When ad items and promotional items are not raised at the end of the ad or promotional period. When a market increase on a product is announced and the retailer waits until the higher cost replacement inventory is ordered before making the price change. Lack of Strategic Merchandising and Display Planning - Keep in mind your mix of sales must contribute more gross profit dollars than the expense dollars it takes to operate your business. The objective never is to see how much of product A you can sell. Rather it is to place demand products at locations and price points which will optimize the number of gross profit dollars your customer will pay you for the goods and services you provide. Take action today to minimize the loss of gross profit dollars. … [Read more...]
What is the purpose of a business plan?
Developing and updating a business plan enables you to clearly define for your management team and investors: The mission of your business The purpose of your business The market and customers the business will serve Your competition The organization and structureof your business The strategies and tactics your business will implement to be successful to includethe marketing plan and operating plan The current financial condition of the business The projected financial results which the business plan will achieve A business plan provides a start up business with a detailed reference of what your business objectives are and how you will achieve them. For an on-going business the business plan is a management tool for gaining management understanding, support, input and follow-through. For all businesses the business plan is a must for receiving financing. The most difficult business plan to write is for the start-up business. The lack of historical financial numbers from your business will require extensive market research to strengthen the credibility of your projections. Input from professionals outside of your business who have successfully operated in your industry and members of your management team can strengthen your business plan. The best meeting environment for developing a business plan is one which encourages challenges and disagreements. This enables the premises of the plan to be tested. There are a number of websites which provide guidance on the structure of a business plan. These are great for structure but should not be used for content. You must be able to articulate the plan, it's rationale and substantiate the numbers. Once your plan is developed it should be used on a comparative basis with your actual results. Tactical changes should be addressed on an ongoing basis as needed. As a strategic tool it should be reviewed by you, your team and outside professionals on a yearly basis. The best environment is to take your team off-site where you can focus on determining what, if any, changes need to be made. Prior to the meeting give specific assignments to your team members. The assignments would include updates on the economy, market demographics, competitive activity and other subjects related to improving your business plan. Business plans improve the probability of success because you, your team and your lender know where you are taking your business and how you plan to get … [Read more...]
Taking the gloves off
If you want to increase sales and protect your market share, you must take business away from competition. High unemployment, a slow growth GDP and low inflation have eliminated three sources from which to grow sales. Too many businesses ignore competition. Knowing your competitors strengths and weaknesses enables you to compete more effectively, serve your customers better and strengthen your ability to increase your sales. Plus, you can minimize the effectiveness of competitors promotional tactics. Customers in general shop multiple stores. If you want customers to spend more of their disposable income in your store you cannot ignore what competition is doing. Knowing what your competitor is doing is part of the responsibility of managing a business. What should you know about competition? What is their price position in the market in each department of the business? What “A” features, price and item, do they run each week? How many items do they advertise in total? How many pages of advertising do they use? What do they promote on their web site? How else are they promoting their business? What are the quality standards they sell in the perishable departments? What is the variety count in the perishable departments? How many price signs do they have in each aisle in their store? How often do they rotate promotional items in their wall of values and end caps? What are the price points on their end cap items? What are their signature items? Are they having unusual success with any item or department? Why do their customers shop their store? How many part time and full time employees do they have? Do they have out- of- stock issues? What is their price spread between national brands and private label? How many customers are in line to check out? How many checkouts are running at peak selling times? Do they receive new items before you? Is there a specific product category which they promote? Do they offer special services? What non-profit organizations do they support in the community? Does their assortment reflect a strong ethnic presence? Once you have gathered and recorded the information on your competition a schedule should be developed to keep this information updated. Most of the information gathering can be delegated. However, the Store Owner/Manager should walk competition weekly. The objective of gathering this information is to enable you to adjust your … [Read more...]
