We are less than two months into the new year. So, what are you going to do differently this year versus prior years?
If it’s business as usual, you will, no doubt, earn (or lose) about the same as you have in prior years. Remember, your bottom line results are a function of what you do or fail to do in terms of running your business.
Regarding planning and action, what changes have you implemented to double or even triple your prior years profits? If you do nothing, you will likely reap similar results as previously experienced.
Take a moment and introspect on the subject of profitability. Profit is the interaction of sales, margins, expenses and inventory velocity. All four of these elements can be manipulated to produce the desired results. If you want better sales, there is a list of actions as long as your arm that you could implement without too much difficulty.
Consider adding a couple of new powerhouse categories, minimize your stock outs, improve your advertising and promotion, upgrade your sales training, revamp and improve your store layout and etc. Make a plan, make it happen!
Margin improvement: that’s relatively easy. Start stocking more margin rich merchandise like apparel, footwear, sunglasses, outerwear, higher end rainwear, licensed products and quality closeouts or makeups of all types. If nothing else, start asking (demanding) for lower prices, closeouts, make ups or special pricing for your promotions. There’s an old saying, “if you don’t ask you don’t get.”
Cutting expenses is like frying bacon . . . regardless how much you fry the bacon, you can always get a little more fat out it. That’s a cute way of saying expenses can always be reduced; it’s a matter of investigation and experimentation. When is the last time you put all your expense categories out for bid? Have you had meaningful discussions with your landlord, electric company, cleaning supplies vendors about cost reductions?
My dad would tell me that when he was young and single, whenever he saw a pretty girl, he would ask her for a kiss. As you might expect, he got his face slapped a lot. He also got kissed a lot!
And the final component of profitability is inventory velocity or the rate at which inventory comes into and out (via sales) the business. Tackle dealers are notorious for have lousy inventory turns, in some cases below two times a year.
A turn rate of two means that mathematically, the dealer is stocking a six months average supply of each SKU. Assuming one can obtain inventory in three weeks or less, this is investing in excess inventory relative to sales. The result is excessive costs such as opportunity costs (could invest the excess cash), insurance, handling costs, shrinkage and obsolescence. Old inventory begets excessive markdowns.
If the dealer maintained the same sales but increased his turns to four versus two, profits would rise considerably.
So, I ask you, what are you going to do differently this year? How about doubling your profits? Can’t do it? Sure you can. Make it so!