Retail Business “Killers”

Today I want to point you to an article called “The Top Five ‘Killers’ of Retail Businesses” from the Retail Owners’ Institute.  You have to keep in mind that the ROI is a group focused on the financial aspects of retailing.  Consequently their “Top 5″ don’t include things like marketing, salesmanship, customer service or any number of other things that would appear on my list.  In fact, the article begins with this rather remarkable statement”  Hint: (Declining Sales’ is NOT One of them!)

Again, these guys are in the business of counting retail beans so their list focuses on the financial.  With that disclaimer, here are their “Top 5”:

5.  Out of Control Growth

4.  Out-of-Control Expenses

3.  Failing to Manage Gross Margins

2.  Out-of-Control Inventory

1.  Being Out of Cash

Like I said, from the bean-counter’s perspective there isn’t much to argue with here.  There’s no doubt that if you run out of cash, you’re most likely out of business.  Read the original article to see ROI’s comments on each business killer for some good insights.

It’s a good article but, in my humble opinion, it misses some very important elements of a successful retail business.  Even the most devout bean-counter should be willing to admit that until you bring the beans in through the front door, the rest is just academic.

Prepare for 2009

 Regular readers know that I keep three books on my desk:

I also have a Bible close by and I've lost my copy of The Seven Habits of Highly Effective People, but I pretty much have it memorized.

I also subscribe to the matching blogs for these books.  A post earlier this week on the E-Myth blog caught mPlanningy attention called 10 Ways to Prepare for the New Year.  There are for ten positive things that you can do to jump start your business for 2009.  I'm not going to repeat them here because you can get them by clicking here.  But, I did want to comment on the whole idea of planning for next year.

Face it, we're being bombarded with bad news every day.  There's a banking crisis.  The stock market has gone completely crazy, down 500 points one day, up 500 points the next.  The big three automakers are all flying to Washing DC in their private jets to beg for loans.  Pirates are plying the seven seas and gas has gotten "cheap" at less than  $2.00 per gallon.  It's tempting to curl up under the desk in a fetal position and wait for things to settle down.

But even though the "pundits" are warning of Armageddon, our economy has gone through tough times before and it will again.  The point is that it always comes back.  During the election, and even now, some so-called "experts" are talking depression.  But the conditions today are much different than they were in the 1930s.  For one thing, bank deposits are guaranteed.  Unless you have all your money at the Bailey Building and Loan, your money is safe.  For another thing, the people who understand economics (and I'm not one of them) have tools today that didn't even exist when the last big one hit. 

Here's the thing when it comes to your business.  Big box stores are in a mess.  They placed orders for fall and Christmas merchandise months ago, not knowing that money would be tight in the fourth quarter (even though they should have seen the signs).  They're desperate to turn that inventory into cash.  The only way for them to do that is spend more money on advertising and lower prices, not a good combination.

That's where you have the advantage.  Hopefully your inventory is in line.  You're flexible.  You're fast.  You're like a speed boat racing a barge.  You can zip back and forth while they plod along.  You can adapt.  Take a look at the "10 Ways" article.  Take it to heart.  The constants are measure,plan, budget, and plan some more.

The end of the year is the perfect time to stop, take a deep breath, and begin anew.  As the article says, "Make a commitment to yourself to make 2009 your best yet." 

Point of Sale Systems

Chances are that when you voted yesterday, you might have
had your first experience with electronic voting. Touch-screen voting devices are replacing the
old punch card system in many areas. The
system wasn’t without its problems, but since many of the machines were being
used for the first time, it doesn’t look like the problems were all that
bad. There’s no question that the days
of the paper ballot are numbered.

In retail, the hand-written receipt is also nearing
extinction.
One of the things that Receiptlet
the big boxes get big is the electronic point-of-sale system. I imagine that Sam Walton probably used a
receipt pad and a cigar box and kept the inventory in his head in his original
five and ten cent store in Bentonville, but those days are long gone.

 The good news is that the type of systems that used to cost
hundreds of thousands of dollars are available today to even the smallest
business. Systems are available from big
names like Microsoft and Intuit, and from smaller companies, many who
specialize in software for particular industries.

If you haven’t taken the plunge yet, here are some
suggestions from cnet.com.

Think beyond the cash
register.
While an off-the-shelf
package may save you money up front, you really want a system that will help
you run every aspect of your business including sales, inventory, payroll, and
customer relationship management.

 Remote access may
help.
You don’t want everything tied
to a single terminal.

 Make sure your system
is flexible and expandable
. Using
your laptop as an additional check-out terminal can keep you from losing sales
during busy periods.

 Decide on wireless
handheld or a touch screen.
There
are a variety of data entry options. Your choice may vary depending on how you do business.

 Pay attention to
support.
When you have your entire
business computerized, the computer had better work!

 Look for detailed
reporting.
What are your needs? Can a package system do what you need? Ask a lot of questions and don’t buy anything
until you’re satisfied with the answers.

 The first point is probably the most important. If you’re going to spend the money and take
the time to set up an electronic system, (and you will spend a lot of time
getting it set up) you’re going to want it to do everything for you that it
can. A system that records sales but
doesn’t adjust your inventory isn’t going to save you much time. An ideal system will scan the item, enter the
sale, record the customer information, and print a receipt.

Then it should update your inventory records, record serial
number information for warranty, and let you know when it’s time to reorder the
item. It should talk to your accounting
software, making necessary changes automatically. If you pay commission, those records should
also be updated by your system. Full
payroll functionality is an added plus.

 Finally, your system should give you the information you need
in reports that make sense for your business. For example, Microsoft has two point-of-sale packages, one cleverly
called Microsoft Point of Sale and the other called Microsoft Retail Management
System
. Where Point of Sale offers a set
of standard reports, Retail Management System allows you to design customized
reports. MRMS has other features that you may find important.

 In addition to the two Microsoft packages, Intuit’s
QuickBooks
is also very popular. An
advantage of either the Microsoft or QuickBooks packages is that they can be
purchased from a local retailer who can provide the necessary set-up assistance
and support. If you also need the
hardware to build your system, Intuit has partnered with Dell for a complete
package. Microsoft has a similar
partnership with H-P. Local vendors usually
offer packages of hardware and software which can be set up to suit your needs.

 So, what’s it going to cost? MS Point of Sale and QuickBooks alone have a street price in the $500.00
area for just the software. MS Retail
Management System costs about $300.00-$400.00 more. The Microsoft/H-P software/hardware package
starts at around $2,200. A
Dell/QuickBooks bundle is slightly higher. A vendor here in St. Louis offers a complete hardware/software package with  Microsoft RMS,
on-line training, completely loaded with Tacony and Baby Lock catalogs for
about $5,000. Obviously, your price will
vary depending on your needs.Cigar_box_2

One thing is certain, while some retailers may wish they’d
gone with a better package, you seldom hear anyone say that they’re sorry they
gave up the pad and the cigar box. 

Baseball, Hot Dogs, Apple Pie, and CPAs???

Joyce M. Rosenberg writes for the Associated Press that in addition to the normal summertime activities, it’s the time of the year when you should sit down with your accountant, not for a barbecue, but for a mid-year review of your business.

The start of summer is still a few days away, but it’s never too early to look at where you are now and at where you want to be at the end of the year.  Rosenberg writes, "Taxes, cash flow, capital spending and employee benefits are among the many topics that should be discussed."

Estimated tax payments are one of the first areas you should look at.  You don’t want to pay too much because the IRS is a notoriously bad place to invest your money.  On the other hand, pay too little and you’ll be hit with a penalty.  Half way through the year is a good time to review.

The article also discusses investments in capital equipment and employee benefits. 

Mid year is also a good time to look at your inventory.  What’s selling?  What’s not?  Generate some excitement in your store by reducing prices on items that may not be flying off the shelves.  It’s an opportunity to create some additional business and to make room for new merchandise for fall. How about a sidewalk sale? 

While you’re at it, spring cleaning may be in order, even though spring is almost over.  Are your displays fresh and inviting?  Is everything neat and clean?  How’s your signage?  If you use price tags, are they fresh and acccurate? 

If your traffic is off during the summer months, it’s a good time to get those non-selling jobs done and it’s even more important that you turn every shopper into a buyer.

10 Financial Yardsticks for your Business

Do you ever get to the end of the day and wonder where the money is?  Business is good.  According to your accountant, you’re making a profit.  But, when you go to pay the bills, there’s not enough money in the bank to go around.

Joseph Anthony writes for Microsoft Office Live on 10 Financial Yardsticks for Your Business.  Cash flow is the name of the game, and sometimes we just don’t take the time to analyze this all-important measure.  The article is geared toward manufacturing, but the lessons apply to any type of business.  Anthony suggests that you get the answers to the following 10 questions:

1. What are your assets?  It’s especially important to keep track of changes in the value of your assets.  Most things will decline in value, but some things, like real estate, may increase.

2.  What are your liabilities?  It’s not yours if you owe it to someone else.

3.  What’s it costing you to produce (or acquire) what you sell?

4.  What’s it costing you to sell what you sell?  This one may be a little more difficult, but you’d better know the answer.

5.  What’s your gross profit.  We discussed this in an earlier post on pricing.

6.  What’s your debt-to-asset ratio?  How much of what you "own" is actually owned by someone else?

7.  What’s the value of your accounts receivable?  Like total assets, it’s important to know if this is going up or down.

8.  What’s your average collection time on accounts receivable?  Are you acting as a banker for your customers?  If so, how long is it taking you to get your money?

9.  What are your accounts payable?  Are you taking longer to pay because you want to or because you have to?

10.  What’s happening with your inventory?  Again, is it going up?  If so, is it because you’re making an intentional investment in more goods, or are there other reasons?

It’s important that you be able to answer these ten questions.  Big companies always have this information available to them.  You should too.  If you don’t, your accountant should be able to help you, or there’s software available that will make the calculations for you.  (Remember, the article is from Microsoft.)