TAKING THE PULSE OF YOUR BUSINESS! Part 1 By Randy Snyder
The micro and macro “pulses” need to be mutual determining and critical factors. Micro would be the individual outlet and macro the total “corporate pulse. In Part one we will cover the macro pulse. In part two, next week we will address the micro pulse.
In retail, revenue “pulse” seems to be first and foremost regarding monitoring the health of the business! The key component of revenue “pulse” needs to be measured is the comparable store revenue. The definition of comparable store revenue is those stores that were open during the period being measured for the entire period last year! All store revenue increases are not necessarily the best measurement as they may not measure profitable growth! Proliferation costs money due to start up costs for building and merchandising the additional stores and many other costs too numerous to mention. In summation, if expenses do not increase greater than sales in comparable stores, the “pulse” on these stores is the most important relative to the income pulse!
Expense “pulse” is the next one I would like to expound upon. Expenses need to be measured by the percent to sales, this year versus last year, and of course performance versus the budget. A business can have a very “healthy” revenue pulse, but if expenses spiral out of control exceeding previous year and budget as a percent to total, income will be adversely affected! Every operating expense along with the cost of merchandise needs to be budgeted and scrutinized constantly to make sure the “pulse” is a healthy pulse. In the event the revenue “pulse” is indicative of a below budget performance, the expenses needs to be realigned accordingly. If the above budget cost of merchandise and expenses as a percent of business continue to exceed plans, there are serious consequences. Firstly, regarding merchandise excesses, an overstock situation evolves, requiring markdowns, eroding margins, and deflated open to buy going forward. Expenses that run awry, can eventually have an affect on the income,and cash flow. Unhealthy expense “pulse” has lead to the demise of many businesses in the past!
Age of inventory, both at the store level, company level and warehouse level needs is a “pulse” that requires close monitoring! The key “pulse” is the measurement of stock turn: as in most cases if the stock turn is satisfactory, the inventory will not show increasing age! Aging inventory (usually oldest first) needs to receive the markdown necessary for liquidating or transfer to an outlet etc. Many business owners have a nemesis regarding marking merchandise down to cost or less! The axiom to remember is that any revenue generation is better than none at all. The longer inventory sits in a store or warehouse, the more it costs in terms of space and money needed to buy and stock new merchandise at both the store and warehouse level. Wage cost suffers as well due to the need to move the merchandise from store to store, warehouse to store etc. A successful retailer usually has a markdown plan based on the delivery date of the merchandise and then predetermined time frames for sequential markdowns. This formula usually applies to fashion or new goods and not classics or staples!
The writer has 40 years practical experience at all levels of specialty retailing. He can be reached at (p) 828 625 4932 or rsnyder921@att,net.
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