Profitability Project • History • February 2006 • December 7-8 2006 • Group Two - December 2008 • Group Three - July 2012
Since Then...• 20 Meetings• More than 40 participating stores• More than 30 stores visited
Concept:It’s the process, not the people
How does it work?• Non-Compete • Conﬁdentiality • Shared KPI’s • Accountant (CFO Level) Kristin Sowa • Online Software Reporting - Monthly • Semi-Annual Meetings • Accountability
What Do We Track?• The K(Key) PI’s:• Only Focused on Profitability• Calculation Protocol is Crucial• True “Apples to Apples” Comparison(Different than the NBDA CODB Survey)• Historical Data
What are KPI’s for P2?
Sales per Square Foot The Formula: Gross Sales/Total Square Feet Use total revenue, and use the total square footage used in the business, not just the selling area.
Gross Margin on Bikes The Formula:Gross bicycle sales less cost of bicycles sold/Gross bicycle sales Bicycles only.
Payroll Percentage of Revenue The Formula:Gross payroll less owner’s gross payroll/Gross Sales Do not include payroll taxes or benefits like health care and employee purchase discounts.
Bike Sales Percentage of Revenue The Formula: Gross Bicycle Sales/Gross Sales
Inventory Turns The Formula: Cost of Sales / Average Inventory (for bicycle and non-bicycle sales) Use the cost of sales exclusive of shrinkage – the cost paid for the goods sold during the previous 12 months, exclusive of freight and shrinkage.Average inventory is computed by summing the last 13 months of inventory value at cost and dividing by 13. Use 13 months of inventory data because it will include starting and ending inventory.Do this for bicycle cost of sales and average inventory cost, and for non bicycle cost of sales and average inventory at cost.
GMROI The Formula: Gross Profit / Average Inventory (for bicycle and non-bicycle sales)Gross Profit is computed by taking Gross Sales less Cost of Sales, and average Inventory is computed in the same way as above. Do this for bicycle and non-bicycle sales
Gross Profit Margin Percentage The Formula:Gross Sales less Cost of Sales / Gross Sales Do this for bicycle and non-bicycle sales
Net Profit as a Percentage of Gross Sales: The Formula: Net Profit / Gross Sales Net Profit for our purposes is the sum of:-EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) -Owner(s) gross pay.-Value of Benefitsowner(s) derive(s) from business Less-The Difference between rent paid and fair market value, if building is owned.
Monthly Revenue Change The Formula:(This year’s monthly Gross Sales less last year’s monthly Gross Sales) / Last year’s Gross Sales for the same month. For example: (December 06 Gross Sales – December 05 Gross Sales) / December 05 Gross Sales
KPI Sample Report
KPI Sample Report
Has P2 Worked?
NBDA “P2 Group” Members• Mike Hamannwright - Revolution Cycles• Dan Thornton - Free Flite Bicycles• Chris Kegel - Wheel & Sprocket• Beth Annon-Lovering - B&L Bike Shop• Kristin Sowa - The Mann Group
Mike Hamannwright• Wooden Hangers• Focus on Where I am Not Up to Par• Seeing my Numbers Four Weeks Earlier• Tech Center Productivity• Facilities Cost out of Whack
Dan Thornton• OTB• Winning Ideas• Cash Flow• Inventory Control
Chris Kegel• Star Trek, “Scottie”• Benchmarking Against Peers Raises the Bar• The Master Mind Principle (Napoleon Hill)
Beth Annon-Lovering• Dollars per Square Performance as it Relates to the Service Department• Overall Growth• Payroll % Decreasing• Gross Sales per Full Time Equalivlament is Increasing• Staff is more Efficient and Productive. Their Pay Increases and so does the Stores Profit
What YOU Can Learn From P2• Measure• WHAT to Measure• Measurement Protocols• How do we FAIRLY compare the multi- store vs the single store• How can small stores be in the same group as a large store?