2. Spreadsheets vs. analysis
– Are you staring at lists?
– Can you truly ‘analyze the columns’?
What should be measured?
What should we analyze?
What’s the difference?
Key
Performance
Indicators
6. What is a
Break Even
Point?
(BEP)
Revenue and expenses are equal
Calculating BEP
– BEP = fixed cost / contribution margin
» Or
– BEP = fixed cost / sales – variable cost
8. Black Friday –
– That point in the year where retailers
traditionally make a profit.
Every month has a Black Friday.
Are you seeing financials once a year?
– Once a quarter?
– Do you know your best month?
– Why is it so great?
Why not break even info on-demand?
Do You Know
Your Actual
Monthly
Break Even?
13. Low Turn Rate Could
Indicate:
Over stock on inventory
Inventory obsolescence
Deficiencies in line up
Slow vendor shipping
Container purchases
High Turn Rate Could
Indicate:
Inadequate inventory
Too low margin
Excellent vendor shipping
Focused spiff program
Advertising success
Low VS. High Turn Rate
14. Retailer A:
$200,000 in inventory
$400,000 in cost of sales
Results: 2.0 turn rate
But what is my true inventory
performance?
Retailer B:
$133,300 in inventory
$400,000 in cost of sales
Results: 3.0 turn rate
Is my margin included?
– No - turns will give me
velocity, nothing more
Example:
17. Gross margin $$ for one year
Average inventory $$ on hand
=
GMROI ($)
Determine your store average as a
benchmark
– Then find the winners and losers and act
on them
GRMOI
18. GMROI takes into account all
of the following variables:
– Landed cost
– Gross margin
– Packaging (2 packs, 6 packs, etc.)
– Shipping time
– Rate of sale
– Selling price
– Markdowns
GRMOI
19. What is the true impact of GMROI?
– Sales of $1,000,000 at 45% GP = $450,000 GM @
2.5 turns = $220,000 average cost: $2.05 GMROI
– Sales of $1,000,000 at 45% GP = $450,000 GM @
3.5 turns = $157,000 average cost: $2.87 GMROI
• Oh, and we freed up $63,000 of cash!!!
– Sales of $1,000,000 at 50% GP = $500,000 GM @
2.5 turns = $200,000 average cost: $2.50 GMROI
– Sales of $1,000,000 at 50% GP = $500,000 GM @
3.5 turns = $142,900 average cost: $3.50 GMROI
• And, we’ve now freed up over $77,000 in cash!!!
– So isn’t it easier to concentrate on the item /
category / vendor GMROI and let the dollars flow
to the bank?
GMROI
22. Is each category performing?
Where will I put this new collection?
Which departments can be trimmed?
Which can be expanded?
Which vendors are over/under
performing?
Why Does
Delivered
Sales per
Square Foot
Matter?
23. Dollars per square foot
– By category
– By vendor
Benchmarks –
– Vendor help (display departments)
– Franchise company figures
Query trade publications
Benchmark your store
– Compare your departments to the store
What is a good store average?
What Should
I measure?
27. Effectiveness of marketing
Service levels
Success at building loyalty
Why Monitor
Percent of
Repeat
Customer?
28. Selling Mostly New
Customers
Low customer loyalty
Could indicate that you are
lacking in service levels
Product not the quality
expected
Effective public marketing
Demographic of the area
Selling Mostly Repeat
Customers
Poor public marketing
Excellent service levels
Message is old
Product only addresses current
aging customer base
Extremely effective private
marketing
Repeat Business Concerns
29. What is New
vs. Repeat
Ratio?
Why is this important?
20% of your customers leave the
market
– Move
– Die
How do I measure this?
Marketing tools?
– Is this a trap??
What is easy to get – first time
32. What does it include?
– Percentage of wages/benefits
• Drivers
• Prep/deluxe
• Service
• Scheduler
– All delivery vehicle costs
Delivery cost = number of
stops/delivery expense
Do You Know
What Your
Net Delivery
Cost is?
36. Why Should
You Care?
Ever write a check to cover payroll?
Do you know what your inbound
accounts payable expenses are?
Do you wish you could forecast cash
on hand?
Are you tracking the trend?
Shelley: who Knows their Break even point right now?
ShelleyBreak even Point is the point at which costs or expenses are equal. There is no net loss or gain. It is shown graphically as the point where total revenue and total cost curves meet. It is the point at which a business turns from making a loss to making a profit.
ShelleyBy understanding where your BPE is you are able to work out:How profitable your present product line up isHow far sales can decline before you start to incur lossHow much you need to sell before you make a profitHow reducing price or volume will impact your profits How much of an increase in price or volume of sales you will need to make up for an increase in fixed costs
Lee
ShelleyFinancial StrategiesThere is more than one way to reach break-even. You might increase your sales, raise your prices to increase your profit margins, lower your profits to generate more gross profits or reduce expenses. You can reduce expenses through cost-cutting measures, depreciating assets, reducing interest-bearing debt or investing excess cash to generate capital gains on that money. Knowing your break-even points will let you see the effects these different strategies have.Marketing ConsiderationsEach time you consider a sale or discount, calculate your break-even points to determine if you can still make money at that price. If you spend money on a marketing promotion, you can determine whether it’s worthwhile by adding the cost of the promotion to your current overhead expense for the time period the promotion is running to determine your new break-even pointTaking on DebtIf you have plans to build a new warehouse/distribution center, add a delivery truck, open another location, or any other financial out lay that will require taking on debt, creditors will want to completely understand at what point you currently become profitable and what you will have to do in additional sales revenue or expense cutting to honor the debt. If you are barely reaching a BPE before month end, taking on additional burden will be unlikely… flesh out more…..
Lee
Shelley
ShelleyTurn Rate is simply the number of times you will sell the value of your inventoryRolls Royce has a very LOW turn rate but they make up for it in extremely high margin. Walmart, on the other hand, has one of the highest turn rates out there. But they have to as their gross margins are so low. So which is better?? Which ever one you can do successfully. Most of us fall somewhere between the two. The inventory of the typical store represents the largest single element of its total assets. The sale of goods from this inventory is the merchant’s chief source of operating profit. So the way in which this merchandise investment is put to work is of utmost importance in achieving a profitable operation.
Shelley/LeeKeeping too low an inventory can cause a loss in business if you don’t have what a customer wants when they want it. However, carrying excess inventory can be deadly. It ties up your open to buy. More than that, a number of studies have shown that carrying cost on excess inventory is roughly 30% per year.
LeeThis is a difference of $32,000 lower investment to achieve the same revenue results. Now, consider the carrying cost. The 30% carrying cost that will be saved on the 32K will be an additional $10,000
Lee
GMROIDoes anyone know their GMROI and can benchmark it against the industry’s GMROI to gage whether or not they are average, above or below average?
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Lee Shelley –youth bedroom example
Shelley
Shelley
Shelley
ShelleyMarketingIf you spend the time and money to send a mailer, or a marketing piece to your customer base, then you have a great sale event, you might assume that the piece was successful… only to repurpose it later and have it fail. But, was the piece successful the first time, or just a coincidence.? You should ask yourself, who came back that was already on my list, versus new clients. This is the only way to tell if your marketing dollars were a waste of money or a smashing success.Service Levels & Loyalty.If over all, you tend to get a high percentage of your sales from new customers, almost all sales come from repeat business, this could indicate other areas of concern.
