Category: Cash Flow

January 9, 2019

The Thirty Questions to Find Your “Silver Bullet”

I got suckered in once. Long before the phrase “fake news” came into existence, back in the days when Norton and MacAfee were the only names in anti-virus protection, my computer started slowing down.

Then up popped an ad for a free diagnostic test of my computer, guaranteed to clean it up and take it to speeds the factory settings never could. I downloaded it and immediately all these warnings came flashing on the screen telling me I was infected and needed to download this fancy, official-sounding fix right away before I lost critical data.

Yeah, you can probably guess the rest.

I took the computer to a local shop who cleaned several viruses and Trojans off the hard drive and got me back to my normal, plodding, limited-by-my-service-provider-not-my-computer speeds.

We’re all looking for that quick-fix, aren’t we? That guaranteed, take-you-to-the-next-level tool that will transform your business? That’s why scams like that computer virus one worked so well. We all keep thinking there is that one silver bullet we’re missing that will make all our ills go away.

Here is where I’m supposed to tell you there isn’t a silver bullet. Eat less and exercise more, right?

The truth is there is a silver bullet. And a bronze one. And a gold one. And a titanium-plated, platinum-infused, diamond-encrusted, gold-leafed, emerald-cut, space-aged aluminum, time-released-capsule one.

The problem is that every business needs a different bullet. In retail there is no one-size-fits-all bullet.

You might be struggling with cash flow while your neighbor down the street needs help with a better marketing message. The store on the next block has a customer service problem, while the store across the street is in a market with too many competitors.

What retailers really need is a good diagnostic tool to help you identify the true problem(s). Unfortunately your business isn’t like an automobile where you can plug it in and see what’s wrong.

You can hire a consultant, but unless they have a background in understanding independent retail, they might not be able to diagnose your true problem either. You can try to do it yourself (I gave you a few Measuring Cups to use in an earlier post), but it is often hard to read the label from inside the bottle.

Since I am the DIY guy of retail, though, I want to show you the approach I would take to diagnose where your business needs work so that maybe you can find the demon holding you back. If you were to hire me, I would look at your business in this order …

Core Values – Is your business aligned with your Values? If not, how and where can we change things?
Market Potential – Where do you stand in your market? Who are your competitors? What is your share of the market? Is it shrinking or growing? What local factors influence your market presence?
Customer Service – How much of your business is Repeat and Referral? How much training do your front line people have? What skills do they have? How well do they greet, meet, and interact with customers? How are their “closing” skills? What services do you provide? Do your services lean customer-friendly or business-friendly? Do you meet and exceed expectations?
Inventory Management – How is your cash flow? What is your Profit Margin, Turn Ratio, Accounts-Payable-to-Inventory Ratio, Cash-to-Current Ratio, etc? What are the “must-haves” and how was your stock position on those items last year? Where is the fat that needs to be trimmed from the inventory? What systems do you use to keep from over-buying?
Marketing & Advertising – What is your Marketing Message? Is it consistent across all platforms (including the in-store experience)? How can we make that message more powerful and effective? Where are you spending your marketing money? Are there cheaper, better alternatives for reaching the people you want to reach? Are there collaborations that make sense? Are you harnessing all the free publicity available to you?

Notice the order of things. Most businesses come to me saying they need help with their Marketing because they aren’t getting the traffic they want. Yet sometimes the problem is their business isn’t aligned with their values so they aren’t attracting the right types of customers. sometimes the problem is there aren’t enough customers in their market to sustain their business. Sometimes the problem is their service is so bad, those who do visit are telling friends to stay away.

Better Marketing won’t fix those other problems or help the business.

If you want to run your own diagnostics, there are several hyperlinks to articles and blogs related to the thirty questions posed above.

If you want to hire me to run your diagnostics, I’m going through that list in that order until we find the first problem.

There is no single silver bullet to fix any and all retailers, but there is a bullet to slay the specific demon holding you back. I encourage you to run your diagnostics on your own to see if you can isolate your problem. When you do find it, send me an email and I’ll help you brainstorm several solutions to solve your problem on your own or with help.

There is a bullet for you, but it’s buried in the haystack next to the needle.

-Phil Wrzesinski
www.PhilsForum.com

PS I hired a consultant once. He compared my Turn Ratio to Walmart’s and told me my problem was inventory control and that I needed to go to “just-in-time” inventory where I had at most a one-week supply of inventory on hand. My dad hired a consultant. He compared our prices to Kmart and Toys R Us and said our prices were too high and then pitched a total revamp of our sales floor into a circus theme (not sure what that had to do with prices). If you’re going to hire someone, make sure they have extensive experience working with indie retailers. Make sure they have a list like this one, too, that spells out what they’re going to evaluate.

PPS Sorry for the mixed metaphor at the end. It sounded good in my head.

December 26, 2018

Save It for a Rainy Day

In the summer of 1989 my parents did something quite unique for an independent, single-store retailer. They bought a fully-integrated IBM computer system including POS and inventory control. It was a state-of-the-art IBM AS/400 with three hard drives and almost a complete Megabyte of storage. The unit was larger than our copier machine. My parents had to build a custom countertop in the office to fit the beast, run a bunch of new wiring to our six new cash registers and five new workstations, and outfit the closet in the office to hold a dot-matrix printer that printed on green-bar paper.

Our version was over 3x this size!

All in all they spent about $180,000 on that system including the software and support. (That’s the equivalent of about $368,000 in today’s dollars!)

They had the money back then because A) they had been saving, and B) it was the 80’s and everyone was making money in retail at that time.

Let’s talk about A) a little more. Savings. Cash Reserve. Rainy-Day Fund. Do you have one?

By most accounts 2018 was one of the strongest holiday seasons ever. Several retailers have told me this year was “better than expected.” That phrase usually means more money in the bank to start the new year than usual.

You have several options ahead of you for what to do with that money including:

Expand your footprint: Maybe you have been eyeing a larger space or better location, or buying instead of renting.
Expand your inventory: You could buy more now to maximize spring and summer sales, expand into a new category, or to grow your store’s capacity overall if you feel like you’ve been under-inventoried.
Pay down your debt: Almost always the best option. Getting out of debt and getting rid of high monthly bills—especially during the slow months—makes a whole lot of sense.
Pay yourself: If you haven’t been paying yourself a salary, I would suggest that you start doing that right now. If you have been paying yourself a salary, you could use this for a bonus for you and the team.
Upgrade your systems: New registers, new software, new tech are all solid investments (and not nearly as expensive as they were back in 1989).
Upgrade your infrastructure: Is it time for new shelving fixtures or a new floor?
Save it for a real emergency or need: Maybe it is best to just sit on it for a while. Economic trends tend to go in cycles and we never know how long this cycle will last. Plus, you never know when a real financial emergency might hit.

These are all valid uses for the extra cash you earn in an up year. They are all easily justifiable, too.

If you’re in this predicament (a nice one to be in, for sure), can I offer you some suggestions? If I were to prioritize them, I would list them this way:

Save it for a real emergency.
Pay down your debt.
Upgrade your system.
Expand your inventory.
Pay yourself.
Upgrade your infrastructure.
Expand your footprint.

Since Cash is King in retail, having cash reserves in the bank is the most critical element to your long-term success.

Paying down debt is good because it lowers your monthly payments and helps with cash flow month-to-month, but it doesn’t help you when something unexpected happens. You have to have some money put away with really strict rules on when and how you can spend it. After you’ve done that, then start whittling down that debt. Because of the cash flow, those two have to be your priorities.

Of course, the old adage is true, too. You have to spend money to make money. You can swap #3 and #4 interchangeably, but with tech changing so fast, having mobile apps, tablets on the floor for quick checkout, and systems that take things like Apple Pay can all help you take care of your customers better. Both 3 and 4 should help you make more money next year. If you’re happy with your tech, maybe you look into expanding into a new product category.

If you’ve already done 1-4, then pay yourself. You’ve earned it—especially since you’ve already done 1-4! You can slap a coat of paint on one wall and get some new free racks from your vendor for a fresh new look for your store if necessary.

You’ll notice, however, that I put “Expand your footprint” last. Unless you’re in an absolute hellhole or have a landlord forcing you out through outrageous raises in rents and CAM, choose this last one carefully. It has far more long-term consequences (both good and bad) than the other six.

When my grandfather moved Toy House from its original location on First Street to the Mechanic Street location, he went from 10,000 square feet to 20,000 square feet. The one kicker, though, was that he could afford to make the jump because he could afford the new building with the level of sales he was already making at the old building. If you need an uptick in sales to make the new place affordable, then it isn’t affordable.

His advice would have been to NEVER expand your footprint because of a windfall from a very good year.

Only expand when your current sales are good enough to support the expansion.

Retail is fickle. Retail is full of surprises. No matter what you do with any windfall from a good year, first put some money away and then pay off some debt. That is the “eat healthy and get exercise” of the retail world that will keep you alive for years to come.

-Phil Wrzesinski
www.PhilsForum.com

PS I know retail has been tough and tight the last decade. I understand you have some rainy day fixes that you’ve been waiting for this windfall to get accomplished. Still try to put some of that cash away if you can. Tithe at least 10% of your earnings into your savings for the next rainstorm. You’ll thank me later.

PPS One year after buying that computer, Target opened in Jackson. Our business took a 15% hit that year after a decade of windfalls. It was an eye-opener for my parents and a quick lesson in how things can change so fast and why cash reserves are so important. Like I said, you never know what is right around the corner.

November 2, 2018

This “Free” is Really Free!

I was looking at the Free Resources page on my website yesterday. There are nine eBooks on Marketing & Advertising, twelve on Customer Service, and five on Money. You can download any and all of them for free. No strings attached. No limits to how many or how often you can download them. No limits to how far or wide you can share them. I don’t even ask for your email address first, just credit for having written and produced them.

Yeah, pretty stupid to give it all away like that for free.

Yet, if you read yesterday’s post, you would understand why I do it. Of the three questions and the fifteen answers I gave yesterday to why I am doing what I do, the last question about the problems I want to solve and the last five answers were the easiest.

Helping other businesses succeed drives everything. It is the starting and ending point. If these eBooks can make a difference, you should have them.

You’re more likely to download them if you don’t have to jump through a bunch of hoops.
You’re more likely to read them if they are short and to the point.
You’re more likely to share them if they are smaller files that you could even print if you wanted.

“A man who doesn’t read has no advantage over a man who can’t.” -Mark Twain

My sales staff got a copy of everything I had written about customer service at that time either through a staff training or by printing copies for their handbooks. (That included Generating Word of Mouth which is technically a Customer Service issue even though you’ll find it under Marketing & Advertising.)

My buyers all got copies of the Inventory Management and Pricing for Profit eBooks (the latter of which is the second most downloaded after Understanding Your Brand).

While the stats counter shows how many times each gets downloaded, it doesn’t tell me how you’ve used them.

Would you do me a favor?

Drop me a comment on this post or an email and tell me which eBooks you’ve used and what, if any, difference they have made for your business. I’d like to know which ones have been most useful and which ones need to be revised, revamped, or removed for better content.

Thanks.

-Phil Wrzesinski
www.PhilsForum.com

PS The five newest eBooks are:

Those first four make up the basis of the new half-day workshop The Ultimate Selling Workshop. (They also stand alone as great Breakout Sessions!) Yes, the live event for any of these eBooks is a far cry better than the eBook, itself. You get more stories and examples. You get the whole presentation tailored to your specific industry or region. If it is a session with owners and managers, you also get tips and techniques for teaching it to your staff. If it is a session with the staff at your business, you get hands-on activities to really drive home the points. While I encourage you to hire me for a live event, please keep sharing and using this information. Together we can tilt the playing field back in your direction.

May 30, 2018

Move Your Dogs Before the Dog Days

Every year right after Memorial Day my staff and I would go on a dog hunt. No, not the little stuffed animal dogs we sold by the packs (although that would be a fun staff training exercise), the slow-moving merchandise that was holding back our cash flow.

Every retailer has these dogs. We all wish we could be perfect buyers, always choosing the right items in the right quantities at the right time. Unfortunately that rarely happens. The great retailers, however, know that the sooner they clean up the mistakes, the better.

The key is to recognize the mistakes, find the dogs, and make them hunt. If you’re a fourth-quarter-driven retailer, you know it is a dog if …

You bought a case last year and couldn’t sell the entire case by Christmas.
You bought it earlier this year and haven’t sold a single item in two or more months.
The item is discontinued by the manufacturer.
The packaging has changed.
The box is crumpled.
Your staff hates it and won’t sell it.
A better solution is coming in soon.

If you’re a smaller retailer with a tighter inventory that needs to turn over faster, you might have more strict criteria than that. The key is to find the laggards, the slow-movers, the merchandise you’ve already paid for that isn’t paying you back, and turn it into cash.

The Summer Fun Sale!

We pulled all our dogs in June for our annual Summer Fun Sale in July. We took the items off the floor, marked them half-price, and put them back out on special shelves in the middle of the store the night before the sale started.

Half-price?

Yes, half-price (or thereabouts, for instance $14.99 became $7.99). Our goal was to move merchandise quickly.

Get it out of the store fast, get the cash, and get back to restocking with new, better inventory that might actually make you some money.

I know some retailers like to do a gradual price reduction. I’ve never been a fan of that. First, it costs you time and money to reprice things. If you have to do two or three markdowns, you’re spending way too much. Plus, if an item has been marked down two or three times, the customer gets the perception that there must be something seriously wrong with the item. Third, by going deep on the first cut, we get hoards of Transactional Customers right off the bat. Three of our five busiest days in our 67-year history were actually the first days of our Summer Fun Sale. One big sale creates a lot more excitement than a gradual death march of price reductions.

Here is another way to think about it … If you bought a crib for $299 and put it on your sales floor at $599 for six months and didn’t sell a single one, how much money did you make on that space? If you answered zero, you’re wrong. You’re actually at negative $299. You’ve lost money on that space. You could try $499 for a month or two and see if it sells. If it sells, you made a little. If not, you’re still negative $299. Or you could mark the crib down to $299 where you know it will sell right away, get back to zero, and then put something else in the space that will make you money.

I also know some retailers who have a clearance section year-round. That is a shrine to the Transactional Customer. It is also a sign that tells your regular customers that everything gets marked down eventually, might as well wait. Since my focus was on my Relational Customers, I wanted my sale to be quick and the dogs gone so that I could put my store back together to look great for the customers I was trying to impress.

The Dog Days of Summer are coming. It’s best for you and your dogs to get them out of the store before then.

-Phil Wrzesinski
www.PhilsForum.com

PS We always started our sale on the third Thursday in July. People planned their vacations around it. Our parking lot was typically full fifteen minutes before we opened. By Saturday afternoon we had moved 75% or more of our sale stuff. After two weeks we went to BOGO on the remaining clearance items. The ultimate goal was to not have to have a Summer Fun Sale. We never got there. We always had dogs. You do, too. Make those dogs hunt.

PPS There was another reason for the timing of our sale. A lot of new merchandise comes out in August and September. That’s a typical cycle for fourth-quarter retail. By having our sale in July, we cleared space just in time for the new merchandise to arrive.

May 10, 2018

Cutting Expenses The Wrong Way

I was in Walmart yesterday. I had to pick up a few things. At the checkout, the cashier kept doubling bagging all of my items. I asked her why.

“These bags tear so easily that almost everyone has a ripped bag at the end. They used to be better but these new bags are too thin.”

I hope for Walmart’s sake that the new bags are less than half the cost of the old bags. Otherwise their cost-cutting move is costing them more than it saves.

I get why they did it. I’ll bet their bags are a huge expense for them. I’ll bet someone pitched them the idea of a cheaper bag, or knowing Walmart, they probably went to their vendor and demanded a cheaper bag. The only way to make it cheaper was make it thinner. And now their employees are double bagging everything so that you can get your groceries home in one piece.

How’s that cheaper bag working out for you?

Bags, like so many other non-merchandise items, seem like a hassle expense. You know you need them but you hate paying for them. I know I did. But that didn’t stop me from buying better, thicker bags than I probably needed. Mostly because I also looked at bags as being a reflection of my brand. Cheap, flimsy bags send the signal that I care about my money more than I care about you. Sturdy, reusable handle bags say I care about you more than I care about money. (Remember that Values post I just wrote?)

The problem is that we too often look at our expenses as single, individual entities instead of how they fit into the whole. We make decisions on those expenses purely on a financial basis instead of thinking about how we want to present ourselves and how we want our customers to feel about us. You have to consider everything, otherwise your cuts may end up costing you more.

In the 68 years we ran Toy House, one of our most profitable years was 2009, smack dab in the middle of the great recession. I had to cut expenses that year to get that profit. Here is a post I wrote January 11, 2010 about how I cut those expenses … “Cutting Expenses the Smart Way”

Sometimes you need to cut expenses. How you cut them is often more important than how much you cut them.

-Phil Wrzesinski
www.PhilsForum.com

PS This trip down memory lane looking at old blogs has been fun for me. Maybe it will be fun for you. Here is a link to one page with all 897 blog posts to date.

April 23, 2018

You’re Looking at Credit Cards Wrong

I was having a recent discussion with a friend about credit card usage. She uses her credit and debit cards almost exclusively. I still prefer cash. Many people think exclusive credit card usage is a young person, Millennial thing. My friend was born on the cusp between Baby Boomers and Gen X.

She isn’t the only person I know who prefers cards over cash. In fact, many smart shoppers prefer to use their cards. They have rewards cards that earn them miles or cash back. Some of my fellow business owners use their cards almost exclusively for their business and go on vacations virtually free.

Credit card usage is the way of the world. It is the way most customers wish to pay you. And with the expansion of Apple Pay and other mobile wallets, that usage is going to continue to increase and become the preferred method of payment not just for Millennials but for all generations. (My son wants me to change banks just because my bank doesn’t yet support Apple Pay.)

Yet many small retailers (and some larger ones) are still stuck in the dark ages when it comes to accepting credit cards.

Yes, you need to accept chip cards. Yes, you need to accept mobile wallet payments. Those are necessary changes in today’s retail climate.

More importantly, you need to check your attitude about accepting credit cards.

I still see retailers who have “minimum charges” for credit cards. If you have that, you’re penny-wise and pound-foolish. You’re telling your customers those few extra cents on that transaction are more important to you than taking care of the customer and serving her the way she wants to be served. You’re telling the customer your needs are greater than hers.

When my friend sees those signs it pisses her off, makes her want to spend less, and makes her not want to come back. Would you rather she comes in once a week to spend $5 or spends zero money and tells people what a horrible store you are?

Heck, even if you allow credit cards for any amount yet you cringe when a customer pulls out her card for a $2 purchase, you need to check your attitude at the door. Swipe fees and percentages are part of the cost of doing business. Period. Unless the majority of your transactions are under $5, those fees are actually quite minimal in the grand scheme of your business. (And if your business does have a lot of $5 and under transactions, you should be making enough margin on your sales to cover those fees quite easily.)

If you want to cringe at a $2 credit card transaction, don’t cringe at the extra pennies you might pay to Visa. Cringe, instead, at the inability of your sales staff to make a larger sale. Cringe, instead, at your lack of connection with the customer that might compel them to buy more. Cringe, instead, at your failure to price things enough to cover your expenses.

Better yet, don’t cringe at all. Celebrate that customer and her purchase. Make her feel as special as the customer who spent $200. Be happy she came in. Be happier that she spent money. Be happiest that you have the chance to build a long-term relationship with her. That is the winning attitude.

You are going to have credit card fees. That is an expected expense in today’s business climate. Your job as a merchant is to make enough money to cover your expenses. Whether you do it through better profit margins or cutting other expenses, your attitude towards those expenses shapes the attitude you have toward your customers.

When you limit how your customers can pay you or simply take an attitude when they pay you in a way that is least convenient for you, you’re taking a business-centric approach. When you have no limits and no worries, you’re taking a customer-centric approach. One leads to smaller average transactions and fewer transactions. One doesn’t. You know the difference.

-Phil Wrzesinski
www.PhilsForum.com

PS The same can be said about whether or not to accept American Express. Yes, you need to accept it … with a smile on your face. You need to be happy when a customer pulls out her Amex instead of her debit card. You need to celebrate the customer, not worry about the fees. You do that by adjusting your margins and expenses to cover it. (As for Bitcoin and other cybercurrencies, because of their volatile nature, you can draw the line there without angering customers. Those of you who do accept cybercurrencies, however, are going to find that you attract a whole new level of clientele that could possibly be quite good for your business.)

PPS Here is the best thing you will read about how to increase your margins enough to cover those credit card expenses.

July 31, 2017

A New Twist to Back-to-School Shopping

Back-to-School shopping has become a huge event with big deals and sales to lure in all those parents and children to buy new clothes, school supplies, and anything else they might want (I once saw a “Back-to-School Sale” sign on an end-cap filled with wine!)

No matter what kind of retail you’re in, you can capitalize on the BTS craze, too—but to a different crowd. You need to get a hold of your teachers.

When we closed Toy House last December we started pulling all the old display racks, spinners, free-standing shelving units, etc. and put them out for sale. It was amazing to see how fast they got snatched up. It was also somewhat surprising to see that almost all of them ended up in a classroom.

I had teachers buying them. I had teachers sending in their spouses to buy them. I had teachers texting teachers about them. I had teachers coming in asking if I had any more of what their fellow teachers had bought.

You have old racks and displays cluttering your limited warehouse space. Don’t throw them out. Take some pictures and send out an email. Have a BTS Fixtures Sale just for your teachers. Not only do you get rid of clutter and make some money, you also make a classroom teacher happy by helping her organize her cluttered classroom. Plus, by getting rid of the old fixtures, you make your store look fresh and new. It’s a win-win-win!

FYI—teachers are setting up their classrooms right now. You need to jump on this idea right away.

-Phil Wrzesinski
www.PhilsForum.com

PS Don’t think for one second that you don’t have teachers as customers. Don’t think for one nanosecond that your regular customers don’t know a whole bunch of teachers. They’ll spread the word fast enough if you let them know soon enough.

PPS We had most of our fixtures priced between $25-$50. Thirty dollars seemed to be the sweet spot. Since you likely got most of those fixtures for free, think of it as found money. And don’t ever think, “no customer would buy that piece of junk.” One person’s junk is another person’s treasure. We sold a lot of racks I never expected to sell.

June 21, 2017

Adjusting the Sails

I learned how to sail at YMCA Storer Camps. I knew how to canoe and kayak (I even did an eskimo roll in a kayak on the New River – bucket list!) I knew how to use a paddle to get just about anywhere, but I had never learned to harness the wind.

That’s me in 1986 on the UM Sailing Team at a regatta at Notre Dame

Sailing looked easy enough. You just let the wind do all the work.

Andy, my instructor, taught me otherwise.

The wind is a fickle thing, always changing speeds and directions. A smart sailor has to constantly scan the water looking for those gusts of wind that might change your tactics.

Sailing may not be as muscle-bound as paddling, but it is just as much work. You are always trimming the sails and adjusting your course. It may look like a leisurely way to get across the lake, but the good skipper is working the tiller and main sheet all the time, making course corrections as the wind changes.

This Sunday I am going to be teaching Retail Math to a bunch of toy store owners. For many, this will be their first real instruction on the accounting side of running a retail operation.

Most people dread math. But reading reports is a lot like reading the wind. Reports can tell you where the gusts are happening. Reports can tell you if you’ve adjusted your sails properly. Reports can tell you if you’re heading in the right direction.

Many retailers think a Profit & Loss Statement (also known as Income Statement) and Balance Sheet are simply for the accountant to figure your taxes at the end of the year. They are much more powerful tools than that. They can tell you when your inventory is too high (or low). They can tell you when your expenses are out of line. They can tell you when it is time to raise your prices. They can tell you when you can pay yourself more money.

At the very least, you should be studying these documents once a month and making course corrections. If you aren’t already reading and understanding these reports, start running these two reports monthly. Learn how to read them. Then as the years go by, start comparing the current month to that month in the previous year. The more I read the wind, the better I get at predicting its next move. The more you read and know your reports, the better you will be at adjusting your business profitably.

Wind speeds (traffic in your store) change. Wind directions (fads, hot products) shift constantly. When your boat is on an even keel (inventory well-balanced) and your sails are trimmed properly (expenses in line), you will be sailing at your fastest (most profitable).

Scan the water (reports) and your business will sail much more smoothly.

-Phil Wrzesinski
www.PhilsForum.com

PS There are many metaphors for sailing. One of my favorites is … The pessimist curses the wind. The optimist hopes it will change. The realist adjusts the sails. You can’t adjust your sails, however, if you don’t know what the wind is doing. Check out the link above to learn how to read those reports and use them to your advantage. The math happens whether you know how to do it or not.

February 28, 2017

Words of Wisdom From 1969

Here is another gem I found buried in a file, long forgotten. My grandfather and founder of Toy House, Mayor Philip H. Conley, penned these words in June 1969, two months before hiring my dad as his new manager.

I don’t know if this was penned to put his thoughts on paper for my dad, or if it was just something that struck him one day. I do not know if it was ever read again after that day (the file I found it in was pretty darned old). I don’t even know what one of the terms means (neither did my mom or dad). He refers to “marking capacity” and “markers”. I believe those were people who put price tags on boxes like my sister and I did as young children. He also refers to “jobbers”. I know that term. Those were the wholesalers or distributors of that day. I do know there are some nuggets in there that ring so true I’m calling them universal.

Here is his June 1969 manifesto in its entirety…

Business is a matter of balance.

Good business – successful business can be achieved as good government can be achieved using a system of checks and balances.

Balance as it applies to our business, there must be a balance between the number of customers, parking, inventory, shopping carts, sales people, stock people, marking capacity, office capacity, square feet selling space, square feet of stock space, store hours, checkout capacity, and giftwrap capacity. An excess of any of these factors creates too much expense for an efficient operation. A deficiency of a factor immediately creates an excess of all other factors – this is very bad for a profitable operation. Management’s responsibility is to maintain balance.

Enough free off street parking is an obvious example. Enough shopping carts is not so obvious. If people have to wait for a cart, then their parking space becomes non-productive , floor space, sales persons, inventory, etc. all become non-productive. Very wasteful, very expensive. We must realize that the customer may be on a time limit, therefore his waiting time must be subtracted from his shopping time. And, too, waiting is most aggravating and will result in a bad attitude for the customer.

Without customers, there is no business. If a customer is not satisfied after he is in the store, there is no sense in advertising to get him in the store.

Any time a customer is not satisfied with merchandise purchased in our store, he may return it for a credit, refund, or exchange. This matter should be handled more quickly than the original purchase.

Inventory balance is most difficult for us to achieve.

Excessive inventory is wasteful as it requires too many markers, too many receivers, too much work capital, too many sales people, too much stock space, and too many markdowns. If not balanced, this is the greatest cause of business failure.

An accounts receivable policy should be set up and adhered to with all being treated alike.

Inventory turns is the number of times your total inventory is sold per year. If you subscribe to the theory that you need only a 90-day inventory, then you should turn your inventory four times a year. Food stores may turn their inventory 40 or 50 times a year. Specialty stores turn theirs considerably less. This is the nature of the business. “If you can’t find it somewhere else, go to the specialty store and pay their higher price.”

Buying direct, although at a better discount, tends to create overstock conditions. In just buying dollars alone, your better price reflects at the most an 18% savings. However, your first markdown is usually 50%. I have not referred back to the other excessive expense factors. Buying direct, except under strict control, is dangerous.

In business the obvious is not always true!!! Example: “You’re nuts to buy from a jobber when you can get from us for less.”

Jobbers have been hurting for the past several years because so many operated on buying at the best price and selling at the lowest price hoping to move mountains (and doing so) of goods. (At a profit????)

So jobbers have been financially weak which is reflected in many ways.

They do not carry a complete selection.
The services of a competent salesman are not available.
Their plant facilities do not allow for an efficient handling of vast quantities of goods.

Historically, three or four jobbers could not supply our needs. Their selections were never broad enough. We many times were forced to go direct to satisfy our needs for a “spread” of goods as well as supplying the needs of our customers, i.e. Monopoly money, Carrom refills.

Direct suppliers and jobbers giver preferential treatment usually to the largest customers. But not necessarily sometimes to the most regular – frequent – steady – GOOD PAY buyer. Over the years loyalty is pretty much a thing of the past.

No one seems to assess the market today. In years gone by, it was wise to spend time assessing how much could be sold profitably in the market and then budgeting the business accordingly. No one ever realized how large this nation’s ability to consume really was.

Business is a matter of keeping all relevant factors (and there are untold, unseen ones) in balance.

-Philip H. Conley

-Phil Wrzesinski
www.PhilsForum.com

PS The more things change, the more they stay the same. This June I’m going to be speaking to the toy industry about how to keep things like inventory and cash flow in balance. If you would like me to speak to your industry, I have some insights that go way back.

January 19, 2017

How Will You Measure 2017?

The New Year is here. Your New Year’s Resolutions are gone. The inventory has been counted. The mail carrier is complaining about all the catalogs weighing down his bag. You’re trying to make sense of what just happened in 2016. (Or just trying to forget what happened in 2016.) 2017 is here whether you’re ready or not.

The only real question you need to answer right now is…

How will you measure 2017?

Will it be by growth in top line sales or bottom line profits? Will it be by management of cash flow or expenses? Will it be by the number of days you actually take off? Will it be by the number of human resource headaches you have (or don’t have)? Will it be by “likes” and “shares” and “comments” on social media?

You get to choose. You have to choose. You have to decide where to put your limited energies and resources. If the bottom line is good, you work on cash flow. If the money is good all around, you work on HR. If the staff isn’t giving you any hassles, you work on PR and social media. If all of them need a hand, decide which one is most critical (hint: cash flow) and go there.

PICK A PROBLEM, SET A GOAL

The key is to determine what you want to measure and – most importantly – how you’re going to measure it. It is that second part that gives you the map to guide your decisions for the year.

Most businesses fail to set specific goals. They set vague ones like “grow profit”. Then they forget all about those goals the very next morning as the day-to-day running of the business takes hold. But if you say “grow profit by $5,000” then you know you need to increase sales, decrease expenses, and/or increase profit margin. If you say, “grow profit by $5,000 through better control of expenses” you have an even clearer path.

The more specific your goal, the easier to plot the course. The more you make it known and talked about with your team, the more accountable you (and they) will be. The more you reward the team for reaching the milestones you set throughout the year, the more they will help you.

Roy H. Williams said it best, “What gets measured and rewarded, improves.”

The more specific you make your goal, the easier it is to draw a map that will get you there.

-Phil Wrzesinski
www.PhilsForum.com

PS Once you’ve set your destination, do yourself a favor. Print it out and paste your goal somewhere in the back office area where you will see it daily. Tell your staff the goal and ask for their input on how to get there. Talk about your goal in every single meeting. Research new ways to reach your goal. Set up milestones to measure your progress. Hold yourself accountable to your goal. Reward yourself and your staff as you reach each milestone along the way.

PPS Not sure how to set your goals or need help with your map? Send me an email. As always, I’ll do whatever I can to help.