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Author: Phil Wrzesinski

Is it a Business or Just a Job?

I work with a lot of smaller retailers – start-ups and indies who are just getting going in this crazy industry we’ve all chosen. Many of them get this one question wrong.

Did you start a business or just create a job?

Most people think they are starting a business, but in reality all they have done is create a job for themselves, often a low-paying job at that. Then when they go to sell the business, they can’t find any buyers.

Here are three questions you need to ask yourself to see whether your retail shop is truly a business or just a job.

Could the business run without you? More specifically, could you hire someone to do your job, or is the whole reason the business exists because you exist?

Do people come to your business because of what you offer or what your business offers? If the vast majority come because of you, you might have a job, not a business.

Do you pay yourself a salary? If you don’t then it isn’t even a job, it’s a hobby. If you do pay yourself a salary, is it a good one? Is it enough to hire someone else to do that job? If you said no, then you might have a job, not a business.

Do you show a profit? If you’re paying yourself a salary, that is a good thing. It means that you could potentially hire someone else to do that job, while you reap the profits – assuming there are some profits. Some owners will make the correct move of paying themselves a salary, but do so at the expense of showing a profit. Some will keep profits low on purpose to avoid taxes. There might be a number of reasons for not showing a profit. Amazon doesn’t seem to need to show a profit. As long as the cash keeps flowing they (and you) can usually keep doing your job. But an indie retailer without profits probably won’t be able to sustain that cash flow for too long. You and I don’t have the deep pocket investors Amazon has. If you’re paying yourself a salary in lieu of showing a profit, you might have a job, not a business.

Not that there is anything wrong with having a job, not a business. You can make a healthy living for many years that way. You might like the job of being boss (and you might be really good at it). You might like the salary you pay yourself for being boss in lieu of having your business show a profit. Those are good and valid points for you to keep doing what you do.

The only downside will be the exit strategy. Once you decide you no longer want your job, if you didn’t first turn it into a business, you’re going to have a hard time finding anyone who wants to buy it. No one “buys” jobs. They buy businesses. Without a business, all you have left to sell are your assets.

Neither concept is wrong, but not knowing the difference can be costly down the road.

-Phil Wrzesinski
www.PhilsForum.com

PS If you want to turn your job into a business, you need to think about three things.

  1. Could I hire and train someone to do my job?
  2. Do I pay well enough to hire someone competent to do my job?
  3. Is there enough profit and/or growth potential to keep the business making money?
When you can answer yes to all three, you have a business, not a job. You have something you could sell down the road. You are truly an entrepreneur. Heck, you could should hire someone to do your job right now and go start another business or two.

People Do Business With People

A friend of mine is going through a change with her business. She opted out of a franchise agreement and is now going independent.

She had a momentary bout of panic when the franchise webpage listed her store as “closed”. She wasn’t closed. She was open. Just doing business under a different name. How were people going to find her?

After we discussed all the steps for getting the new name out (press releases, ads, new website, owning her Google Place, contacting her networks to update her info with them, emails, Facebook, Twitter, etc), I reminded her of one simple thing:

She was the same person doing the same business in the same location with the same Core Values and the same vision and mission.

None of that had changed. And by her own estimate, 90% of her customers did business with her, not the name on the sign. All the extra advertising and on-the-pavement sales she had planned for the transition would help her pick up that other 10% in no time at all. In fact, based on what we discussed, I expect she’ll be at 110% within a couple months.

People do business with people.

You can do all the advertising you want, but if your people aren’t performing, your business will suffer. Likewise, if your people are outstanding, you can overcome almost anything. It is your people that get customers to come back and bring their friends.

Put your money into your people and no matter what curve balls come your way, you’ll knock ’em out of the park.

-Phil Wrzesinski
www.PhilsForum.com

PS Put more emphasis on hiring the right people to begin with. That makes the training easier. Yes, training. If your business relies on repeat and referral traffic, your training budget should far exceed your advertising budget.

The Best Ways to Grow Your Facebook Reach

Everyone is buzzing about the Facebook Fraud.

Real or not, paying for FB to “promote” your page is not a smart way to grow your business.

You need FANS not “Likes”. You want people who will engage and share. You want people who want to hear from you. You want people who want to see you succeed. You want people who will be your evangelists, bringing others to see you.

You cannot buy those people on Facebook. You have to earn them one at a time.

How?

Post Relevant Stuff: Tell them interesting information that is important in their lives. If you are a running shoe store, post information about training tips, upcoming events, injury prevention, etc. If you are a baby store, talk about safe sleeping, car seat installation, and potty-training. If you are an electronics store, post about innovations and upgrades and whether or not they are of value.

Post Shareworthy Stuff: Post things that no one else knows. Post things so cute and funny (while also relevant) that your current fans want others to see it. Post things that just beg to be shared. Share things to your page. If you found it Shareworthy, your fans will, too.

Post Engaging Stuff: Ask for opinions (and act on the results). Ask for thoughts and ideas. Naming contests, polls, and guessing games are engaging and fun.

Post Emotional Stuff: Speak to the heart of your customer. What is her desire in relation to your products? Sell toys? Speak to the growth and success of her child. Sell jewelry? Speak to the reaction on her face when she opens the box. Sell mattresses? Speak to the feelings of finally getting a good night’s sleep.

Nostalgia is a strong emotion for businesses that have been around the block a few decades. Post stories and pics about the olden days (if you think FB is only for the younger crowd, post a pic from the 60’s and get ready to be amazed).

Facebook, to truly be effective for your store, is not a numbers game. It is a message game. Win the message and you’ll have all the numbers you want.

-Phil Wrzesinski
www.PhilsForum.com

PS The big question is, “How often should I post?” To be most effective you should post at least once a day, but only when you have the right message and something new to say.

Negotiating About Price

This article from RetailCustomerExperience.com should be required reading of anyone working indie retail.

We all get told at one point or another, “Your price is too high!“

This article gives you clear responses that that anyone can use to handle such a situation.

(Reader’s Digest version for those lazy people who don’t want to read a five minute article… ask the customer, “What would you like to give up?” and put the ball in their court for why your price may be higher. You quickly learn what is important to your customer and you open the door for a discussion that makes your customer more informed.)

-Phil Wrzesinski
www.PhilsForum.com

PS You really should read the whole article because there are a few more steps that anyone on your staff can follow.

Tired of Saying No?

Everyone wants a discount. Everyone wants a deal. They bombard you daily. Can you match this price? Can you give us this break?

You’re tired of saying no. Me, too.

What if instead you started saying Yes?

Yes, I can do that. Yes, I can offer that. Yes, I can do something.

What would it take to say yes? Higher prices and margins? Support from your vendors? Lower expenses? Guts?

There are certain aspects of retail that lend themselves perfectly to saying yes. Food service is one. If you sell food, whether a sit-down restaurant in a fancy part of downtown or an ice cream stand on the boardwalk, you should set your prices high enough that you can say yes all day long to whatever gets asked.

Don’t advertise that you say Yes. Just do it. Say Yes out of the generosity of your heart. You’ll feel better (Yes always feels better than No). Your customers will feel better. They’ll start telling everyone else about your generosity. New customers will flock to see you because of that generosity.

When you say Yes more than you say No you’ll get more customers. Period.

Those of you selling non-consumable goods are tuning out. Stay with me. There is something you can do, too.

Generosity is contagious. You will be surprised what you can give when you start looking to give. Can you give free delivery? Free giftwrapping? Free extended warranty? Free balloons with your logo on it? Free assembly? Free tune-ups? Free shoe laces? Free yard stick? Free gift with purchase? Free information? Free instructions? Free tips? All of that should be built into your business from day one.

When someone asks for something, rather than tell them No, tell them what you can do. Say Yes. It feels better.

(Once again, though, don’t advertise it. Just do it. Give, give, give, and let your customers advertise your generosity for you.)

-Phil Wrzesinski
www.PhilsForum.com

PS Yeah, you might be thinking that you can’t raise your prices enough to cover any generosity. I’m telling you that you can. The formula is in my first Freebie, the one that launched Phil’s Forum Publishing LLC, and it is still as relevant and effective today as it was the day I wrote it. If you aren’t using my Pricing for Profit tips, you’re leaving money on the table and not giving yourself enough room to say Yes.

PPS Notice I did not say “match prices”. You don’t have to match prices to give generously. There are other valuable services you can offer. In fact, you don’t have to give away anything. But if your current strategy isn’t working or you are feeling beat up by the requests, this is another way to go. If you’re in food service, this is one of the best ways to go.

It’s the Super Bowl! Don’t be Boring!!

Tonight is the Super Bowl. Half of the talk will be about the game. Half of the talk will be about the advertising.

Everyone who spent the $4 million for a commercial to air tonight is hoping for one thing – Talk.

Good or bad.

Just talk about the ad. Please.

We will be talking about the best and the worst ads, which gets those companies what they really want – extra print and air time for their $4 million. Even the really bad ads, unless they are horribly offensive, will generate business for the companies who aired them, thanks to all the extra talk.

The worst thing any of the advertisers can do tonight is be boring, be plain, be somewhere in between the best and worst ads. $4 million and no talk. Sad.

The lesson here is simple. If you want people to talk about you, you cannot be boring, middle-of-the-road, play-it-safe. You have to get out there and do something that will get people to talk.

Watch the game (and ads) tonight. Watch the talk tomorrow. The ads most talked about will be the most emotional ones and the most surprising ones.

Can you be more emotional and more surprising in your business? It will get people talking.

-Phil Wrzesinski
www.PhilsForum.com

PS The emotional ads that resonate with your Core Values always get the best response. Always.

Don’t Marry Your Inventory

Yes, you bought it. But not for the long term. Your inventory is more like a one-night stand. Love it and leave it. Love it and sell it. Love it and let it go.

Today I am kicking a lot of my inventory to the curb. The Just for Fun Sale starts at 9:30am. Products that I loved were not loved quite so much by my customers. That’s okay. We marked them down and are going to find them all good homes.

Most of this stuff has been here less than 18 months, some less than a year, some came in just last fall. If I ordered a case of six of something and could only sell two during the busy holiday rush, those other four pieces left behind aren’t going to sell without some help.

Before we got a POS system, I would hear the wedding bells of buyers telling me, “That’s a must-have, Phil. We need to stock up on those.” After the POS showed we only sold 1 of the 24 pieces on hand over the past two years, the wedding vows would be echoing, “But I love this item. It just needs time to sell.” Or I would hear the classic toast of, “I can’t afford to mark this down…”

Don’t marry your inventory. Love it and let it go.

Makes it easier when you count your inventory, too. Missing a few items? Shoplifters got some goodies? Do the math. How much is missing? If your shrinkage is less than 1% of your sales, you’re doing pretty darn good. Years ago the National Retail Federation stated that annual shrinkage is around 3%, with employee theft being the biggest part of that, followed by customer theft and employee errors (either at the cashwrap or at the receiving end).

You are going to be shoplifted. You are not immune to theft. Put in all the cameras and security measures you want. Won’t stop it completely. Wal-Mart has cameras and other security measures and still about $500,000 goes missing per store. It is just the cost of doing business. If that cost is less than 1%, then you’re doing things right. Don’t lament the loss.

Inventory is a means to an end. Its sole purpose is to move out the door one way or another and find its long-term lover, so that you can replace it and move on. That lover is not you. You are just the go-between, the rebound guy, the pimp.

Don’t marry your inventory. Go find it the love of its life – at whatever cost – and move on.

-Phil Wrzesinski
www.PhilsForum.com

PS Your end game is to get the customers to love the product more than you love it. Plain and simple. The most profitable way is better merchandising. Give the product good exposure on the shelf, a sign, a spotlight, or whatever it takes to make the product shine. But if that doesn’t work, dump it and move on. The sooner the better.

How Much Cash is Enough?

(Warning: This post includes math. If you wish to stick your head in the sand and stay away from all things math, do so now.)

This is a big question at the end of the year for pretty much all retailers, especially us seasonal retailers. We’re flush with cash from the big Christmas season. We’re thinking we want to give ourselves a nice bonus, possibly pay down a loan, or even bonus the employees who worked so hard.

We just want to make sure we have enough cash for the upcoming year. But how much cash is enough?

You need to calculate two numbers – Current Ratio and Cash-to-Current Liabilities Ratio.

To do that, you need a Balance Sheet from January 1st. Your accounting software can easily print that for you. (If you don’t have any accounting software, take some of that cash and invest in Quickbooks and a class on how to use Quickbooks – it will pay for itself in one year!)

On your Balance Sheet locate these three numbers.

  • Current Assets
  • Cash
  • Current Liabilities

The Current Ratio is calculated like this:

Current Assets divided by Current Liabilities = Current Ratio

The answer will typically be shown as a number like 2.9. A good rule of thumb is to have a ratio of 1.5 or higher. Typically seasonal businesses at the end of their season will have a ratio around 3.0 or higher. If your number is around 3.0, that’s pretty good.

The Cash-to-Current Liabilities Ratio is calculated like this:

Cash divided by Current Liabilities = Cash-to-Current Liabilities Ratio

The answer will typically be shown as a percentage like 75%. For some businesses you would ideally like between 10-20%. But for seasonal businesses entering their slower season, you will want much more, as much as 70-80%. If you are a seasonal fourth quarter business, 75% is a good number to have right now.

Separately, the two numbers only tell part of the story. The key is to look at both together. If both numbers look good, then your only real worry is deciding what to do with the extra cash. If both numbers are weak, then you have some tough decisions to make to try to raise some cash and get cash flow under control.

But when one is weak and the other strong, there are a number of issues at play.

If the Current Ratio is strong but the Cash-to-Current Liabilities is weak, then you likely have too much inventory. That may be on purpose because you got a good buy or are planning an expansion or are growing inventory for the upcoming season. Or it may be that you bought too much last year and are carrying excess inventory. It might be time to have a sale.

If your Current Ratio is weak but Cash-to-Current Liabilities is strong, you need to start writing orders and building up your inventory.

The math isn’t that hard to do. The results, however, tell you a lot about the health of your business. Don’t ever be afraid of the Math.

-Phil Wrzesinski
www.PhilsForum.com

PS If you are a summer seasonal business go pull your Balance Sheet from the end of your season and do those calculations from there. If you are not a seasonal business (doing 40% or more of your annual business in one quarter), then you don’t need the big build-up of cash so those numbers can be much lower. Just keep an eye on them each month.

Top Ten Blogs from 2013

A lot of people thought these blogs were interesting enough to tell others about it. Just in case no one shared these with you, here are the top ten most shared blogs from 2013.

Are You Open-to-Buy? Inventory Management is one of the most difficult and costly things to do in retail. Do it right and your cash flow and profits soar. Do it wrong and no matter what else you got right, you’re still out of business.

Sit in the Hot Seat for a Bit if You Want to Improve I made Ernie sit in the hot seat to find out how we could improve his business. We looked at each interaction, one-by-one, until we found the breakdown in customer service. Do the same for your business and you’ll know what to focus on for 2014.

Two Types of Customers (and Other Generalities) Everyone likes to have things broken down into simple lists and digestible analogies. This post does that for you.

Everything I Possibly Can Simple message: The best retailers are the best because they keep learning new ways to be better.

Great Minds Discuss Ideas My shortest blog of the year – based on a great quote by Eleanor Roosevelt.

I Did Some Showrooming Showrooming is a big deal that is hurting brick & mortar retailers all over the country. The real problem isn’t the smartphone or Amazon. The real problem is our own ability to close the sale.

I Tore Up My Office Yesterday If you want different results, you have to do something different. (I think this got a lot of love because everyone wanted to see my messy office.)

Peeing Before the Race The dog that does its business before the race will run the fastest. The business that does its business before the season will be the most successful.

Anatomy of a Staff Meetting – Play Value I’m on a crusade to make staff meetings more fun and memorable. Who’s with me?

The Mortar Between Your Bricks Bricks are the products you sell. Mortar is everything else. You need good bricks to build a good business. You need strong mortar if you want that business to last.

May the lessons of 2013 bring you great successes in 2014!

-Phil Wrzesinski
www.PhilsForum.com

PS If you want more, here are the Top Ten Blog Posts of 2012.

Give Your Business a Physical – Track These Numbers, Too

There are many different metrics you need to measure to determine the health of your business. Two of the biggest are Profits and Cash Flow. If both of those are good, your business is probably doing well.

But that doesn’t mean you don’t look at other numbers, too. That would be the equivalent of a doctor checking your temp and blood pressure and determining you are completely healthy without looking at anything else.

Here are some other numbers you should track to keep a check on the pulse of your business.

Traffic – Number of transactions you had this year compared to last year. Did that number go up or down? If it went down, why? 
  • Did your location get worse? 
  • Was there a change in the types and numbers of stores around you? 
  • Was there a drop in population? 
  • Did you cut back your offerings and categories significantly?
If your traffic was down, but none of these other factors were negative, you have a hole in your Customer Service (repeat and referral business) and/or Advertising (first-timer business). You need to find that leak and fix it fast.

Average Transaction – Take your total sales and divide by # of transactions. Compare to last year. If this number went down, why? 
  • Did you carry fewer high-ticket items? 
  • Did you add more low-ticket impulse items that people might run in and grab? 
  • Did you do anything to attract more youth? 
If none of those factors were in play but your average ticket went down, you have a hole in your staff’s ability to sell. You need to fix that fast.

Market Share – This is a little harder to calculate, but an incredibly valuable piece of information that can pinpoint problems – even if you had a great year on paper!
  1. Find the national sales figure for your industry. 
  2. Divide that by the population of the United States to determine sales per person. 
  3. Multiply that times the population of your trade area to determine the market potential for your area.
  4. Divide your total sales by that market potential to find your percentage or share of the market.
  5. Compare it to last year’s number.
You can have an awesome year with solid sales growth and decent profits and cash flow, but still be in potential trouble if your market share is slipping. If all your growth was fueled by huge growth in your market, but you aren’t holding onto your share of that market, then you are ripe for being picked off by a better competitor entering your market. You need to figure out why your share is decreasing and fix that problem now.

You can also have a lousy year with declining sales and profits, but mostly fueled by a change in the market. Maybe your industry is in decline (smaller sales per person). Maybe your trade area is shrinking. But if your market share is growing, then your big issue is determining whether to cut expenses and inventory and hope the market comes back or move to a new market.

Make sure your Profit and Cash Flow are good. Those are immediate life threatening problems for your business. If those are good, it buys you time to check/fix the other problems.

Give your business a full physical. An ounce of prevention is worth a pound of cure.

-Phil Wrzesinski
PS Be honest in your evaluations. Even if there are circumstances beyond your control, there are always circumstances you can control and improve while you ride out the storm.