I was at a conference where one of the speakers promised us he could raise our sales 300%!
Yeah, like me, you’re all laughing at him. Huckster, Snake Oil Salesman, Liar Liar Pants on Fire and other derogatory terms crossed your mind. But after further review, I think his plan was solid and would probably work. Short term.
His plan was simple.* Slash your prices by 50%. Increase your advertising by 400%. In short time your sales will be 300% greater than the same period last year. You’ll be broke and filing bankruptcy, he was quick to note, but you’ll be happy because sales are up!
And therein lies the problem…
Ask any retailer, “How’s biz?” and they’ll either be happy because sales are up or sad because sales are down. Folks, we’re tying our mood to the wrong numbers. It isn’t about Sales. It is about Profits. Sure, increased sales make it easier to be profitable. But they don’t guarantee it.
I’m still waiting on the savvy retailer, who when asked, “How’s biz?” tells me, “Awesome! I was able to cut three points off my COGS and finally got a handle on expenses. Profit this year is well ahead of last year.”
Then again, I think most retailers are not even calculating such numbers. They are just waiting until the year end when the accountant tells them if they made any money or not.
I get that. Retail accounting can be scary. Even though I’ve written a book on the complete financial analysis of the typical toy store and have also written an easy guide to reading your financial statements (those reports Quickbooks and all other accounting software can print with just a couple clicks), I’m still constantly trying to wrap my head around our financials.
But that is far better than putting my head in the sand and ignoring those numbers. Especially now with the 4th quarter finally under way.
Now is the time to figure out a new pricing structure that might increase your gross profit.
Now is the time to figure out which expenses are out of whack and need attention.
Now is the time to figure out what inventory isn’t moving and needs to be marked down.
Now is the time to figure out where are the holes in your training program.
*PS Don’t try his plan. Please don’t try his plan. Even he didn’t want anyone to try his plan. He was just trying to make a point (and I was, too). If you try anything, try measuring your financials once a month. Yeah, it’s more work on your part. Yeah, it’s way more rewarding when you do that work right! Waaayyy more rewarding.