7 minute read
Barking Mad
Pramland’s John Barker is taking a look how nursery retailers can survive these strange times and why a focus on margins and successes might be key.
Another month has ticked by and another month can be marked up as “odd”. I’ve spoken to a fair few of you and it would appear that we are all facing these strange times. I thought this month I’d forget all about this and look at something that is now more important than ever, margins and how focusing on your successes is the key to trading during these difficult times.
When the shop is quiet it’s far too easy to wallow in a pit of depression, instead what you should be doing is looking for the positives. Don’t ask yourself “what am I doing wrong”, ask “what am I doing right” and “how can I implement that success in other areas of my business so that I can turn that into a win”. Instead of wandering around your shopfloor like a bear with a sore head when the phone hasn’t rung for an hour, or you can’t remember the last time a car pulled into your car park why not take a seat, have a cup of coffee and get a pen and paper out and get scribbling. Look at how you’ve done this week and month. Don’t isolate days, that will only depress you more. Compare the past few weeks and months so you know if your trading trends are stable, increasing or (hopefully not) decreasing. You’ll be amazed at the moment – I was when I looked at the details – the quiet days are the ones we seem to focus on when in reality
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the end of the end means they were just blips. We’ve seen some truly terrible days over the past few months, but this hasn’t resulted in a decline in turnover at all.
Another good detail to look at is if you are profitable. After all, if you know you’re profiting you can rest assure that I business is a little quieter it’s not going to have as huge an impact on the businesses cashflow. Firstly, work out your operating costs. Write down anything you pay out each month / week – rent, rates, utilities, insurances, wages, accountancy fees – everything. Once you’ve done this break that down into a period of time you’re happy to operate with weekly, monthly or quarterly - it’s your choice. Personally, I like to operate on a weekly basis as that matches how I manage my cashflow. Once you know how much it costs you to simply open your doors during this period it’s time to figure out what you need take each week in order to stand still. This means it’s margins time!
As we all know margins in the
nursery industry vary greatly. Some brands give us fantastic margins, others are tight from day one. Some don’t protect pricing which means margins then slip further and others (mentioning no names) seem to just operate on a basis of RRP with everyone and we love this! It’s a balancing act across all your products, don’t be afraid to earn 20% on one product if you’re earning 35% or 40% on another. The simple fact is that you need to estimate what your average margin is. You don’t need to work this out for every product, we only need a good estimate. Try looking at your top 10 lines in each category and averaging them out – this should give you a close average margin for the majority of your takings. I find it simplest to work my margins once I’ve settled my books with the VAT man! I hope you all know how to do this? If not it’s dead easy. Work out VAT payable on the purchase of the item, then work out the VAT payable on the sale of the item. Take the amount paid at purchase (input) from the about payable on sale (output) – this gives you the VAT liability, add this to the purchase price and that’s the actual cost of the item once sold. Divide the Cost by the Sale Price and boom! You have a percentage – this is your margin.
So, where next? let’s assume, you average 30% (we all wish LOL) margin – take your operating costs from above and divide by the margin (for example a margin of 30% means divide by 30), and times the result by 100. The figure you now have is basically what you need to be taking on an average week in order to pay your operating costs and suppliers. Fingers crossed this will reassure you that things are all good. If the figure you are left with looks about right for your average turnover, then you know you are doing a good job. Well done you! Cashflow will mess this simplified calculation up, some weeks every invoice under the sun will be due and others you’ll have nothing to pay. The point is that on an average week you are profiting and that’s amazing!
So, you’ve looked at your turnover and realised it’s stable despite a few peaks and troughs. You calculated that on your average week you’re profitable what next? Now it’s time to focus on some brands. Look through your order book, work out where most of your business is going. Don’t think you know the answer to this. You don’t sell everything in your store – staff account for sales too and it doesn’t hurt to do your fact finding. You may discover that furniture accounts for the majority of your turnover or that a particular brand doesn’t see sales from one month to the next. Consider how these anomalies sit in relation to your If a brand or product accounts for next to no sales how does their area in your store fit? There’s no sense in a brand accounting for 2/3% of your turnover having 15% of your shopfloor. Likewise, if you gave your top performing item more room, added more colours to the display would this increase the revenue generated?
business, if a brand or product accounts for next to no sales how does their area in your store fit? There’s no sense in a brand accounting for 2/3% of your turnover having 15% of your shopfloor. Likewise, if you gave your top performing item more room, added more colours to the display would this increase the revenue generated? It may seem like a gamble but taking room off brands and products that underperform in order to increase shopfloor space for your top selling items can result in great returns.
Finally, take a look at your social media. Is there any correlation between your posts and your top sellers? Do you find that your better takings days follow more active social media days? These are simple questions but ones that can affect what you post and when you post it. The end goal is to raise awareness of your store and your offerings, when customers are being more selective of how and when they spend, we, as retailers need to be smarter to ensure they are presented with the sort of posts that will encourage them in to store and more importantly to spend.
Numbers are a business’s best friend, they can confirm where things are good and they can highlight where things need to change. But you’ll only benefit from the information they can give you if you take the time to analyse them and do this on a regular basis. We all like to think we know our businesses, but how many of you can hand on heart say they KNOW their business?
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