Sometimes in retail you are faced with a difficult choice. In a tough economy, one of those choices is Profit vs. Cash Flow.  Sometimes you have to give away your profit to get more dollars streaming through the till. Sometimes you have to give up chasing dollars just to protect your profit margins.   The question is when do you choose Profit over Cash Flow (or the other way around)?

Open-to-Buy is great for businesses with vendors who ship quickly and can pinpoint delivery with consistent terms.  It works great for businesses whose monthly/weekly/daily sales are predictable.  It is a super system for companies who can give the system full-time attention.

In other words, for the Independent Retailer, Open-to-Buy sucks!

I've looked at a half-dozen OTB methods, none that I could ever get to apply to my business without spending more time on that than I spend writing actual orders.  Too many vendors with different terms, different minimums, different seasonal needs, different availabilities.  If I tried to run LEGO on an OTB, we'd be OOB (out of business).  I sell it all in December, but if I don't order it to arrive in August, LEGO will be sold out and I'll get nothing.

Instead of an OTB, we followed these three simple principles this past year that gave us the results we wanted.

This past year I cut expenses at Toy House by 7.8%. And I did it without sacrificing customer service or the reach and frequency of my advertising.  Here's what I did:

PAYROLL - Yes, I cut payroll. Had to. It is the single largest expense we have. Yet, even with all my cuts, my payroll actually became a larger percentage of expenses than before. And customer service did not diminish.

The two things I did were:

• Schedule Smarter - By more closely tracking sales I was able to better schedule the staff to make sure I covered the busiest days and times without over scheduling the slow times. I also spent more time matching team members to make sure I had the most efficient crews working when staff was at lower levels. And I put my peak staff on at peak times to get peak results for my money.
• Divert My Own Salary - As the president of the corporation, I pay myself a salary. This year I took a pay cut, offset by a dividend on the company stock I own. This shifted my payroll expense from the Profit/Loss statement to the Business Equity. If your business has a lot of equity, this can be a great way to shore up the P/L for the short term. Talk to your accountant to see if this is right for you.

Net result - 4.8% cut in payroll and related expenses

Christmas is over.  Retailers across the country are adding up the numbers to see how they did.

The media is having a field day reporting about whether Sales were up or down and basing who "won" or "lost" on that number.  But the media are not looking at the whole picture.

Sales are only one number among many that tell the true story of a business.  You also have to look at critical numbers like:

• Expenses
• Inventory Levels
• Profit Margins
• Cash Flow
• Net Profits
• Happy Customers (had to throw that one in, too:-)

To make all your decision based only on Sales is to decide what an elephant is by only looking at the leg.

My father taught me years ago that it is virtually impossible to get all those numbers to look good at the same time.  But if you can get 4 or 5 of the 6 numbers going in the right direction each year, you're doing well.

So how did you do?

At Toy House and Baby Too I was able to...

I know you have many concerns and challenges as 2010 starts  but with Xmas and inventory clearances in place for this month - This is what you should be focusing on right now in this  first week of January 2010.

This is my to do list for you.

Review:

2009 Xmas sales
2009 sales totals
2009 marketing initiatives
2009 operating cost
2009 buying budgets

Immediate goals  on my to do list for you:

2010 projected sales targets - let's assume 15% increase

2010 proposed marketing strategies

2010 projected buying budgets and projected operating costs

I have the knowledge to help you . You need to stay focused on your business . Reviewing and Planning is what you need to be doing right now.

Do not go to Market to buy this month or next with out checking out my newest Retail Makeover - Getting Ready to Buy coaching program  (link)  -   http://www.barbaracrowhurst.com/grb.html

Contact me today. Let's get started.

Best

Barbara

Get the most out of the Holiday selling season!

Final Tips from Barbara Crowhurst at Retail Makeover

1. Color, my approach to store design is simple use paint to change the mood. Your store should be neutralized with wall colors like Benjamin Moore: Delaware Putty, White Sand or even Bronze Beige. Pick 1 area in your store that you can color block - one of my favorite colors for the Xmas season is Rouge by Benjamin Moore. Try this one -  all it takes is a quart of paint.
 
2.    Special note about  merchandising - only products that sell well should be on your floor at this time. You should have reports in hand that show you what sold and what didn't from last year. I hope your products reflect what your customers want and will buy. Make sure you are  bringing products out from the stock room daily.

3.    Staff training must continue weekly - focus on selling, product knowledge, store procedures and customer service. I know it's busy but a weekly check-in with your staff is a must. Never stop training; never stop getting feedback from your staff on how things are going.

4.    Daily work plans for every staff member are a must - your goal setting doesn't change when things get busy. It can be even more crucial at this time. I believe if it's in writing it keeps the work that needs to be done in the forefront of your staff's mind.

(Note: I know it's already December 6th.  For some of you it might seem like too little too late.  But the advice is good and I didn't want to wait 11 months before sharing it.) 

Today's sermon from Pastor Dr. James Hegedus at the First Presbyterian Church of Jackson was about "Doing December Differently."  Would it surprise you to learn that pastors take the same approach to December as retailers?

As Pastor Jim put it, "I turned the page on the calendar and sucked all the oxygen out of the room."

Yes, big, deep sighs as we brace ourselves for the onslaught of the busy season.

Pastor Jim went on to talk about how he is preparing his way for the Lord differently this year.  As retailers we need to think about how we prepare, too.  Here are three things I encourage you to do differently this December.

At some point you will have a customer with a problem. And your success will depend on how well you solve that problem in the customer's eye.

The key is knowing the three people who can solve the problem. Those people are:

• The person Most Capable of solving the problem
• The person Closest to the problem
• The person Least Busy at the time of the problem

The problem for most businesses is the order in which we prioritize that list. From a business owner's standpoint the ideal priority would be:

1. Most Capable
2. Least Busy
3. Closest

From a customer's point of view, however, the order would be:

I hope that you will stop by every Monday my weekly blog either here or at www.specialty-shop-retailing.com, and also that you will subscribe to my free podcasts.  It is my pleasure to help my fellow retailers in every way I can, and I think that whether you are a seasoned veteran or a newbie, there will be ideas that you will find useful in my book, Specialty Shop Retailing: Everything You Need to Know to Run Your Own Store.  

Happy Retailing!

Carol Schroeder