Too often we see retailers running their businesses with the belief that they will make their money when they sell their business. These folks tend to bot worry about the day to day as much.
It’s a mistake.
For years, we have written that retailers need to make every day their payday.
This is an important message as it focuses on the goal of driving business value. Too often, we see retailers working about, being focussed on, the wrong things, things that do not directly affect business value.
Make every day your payday.
It is a simple mantra that is worth repeating daily. It should guide every decision. Does this, or that, add value to the business. It it does hot, why do it?
There was a time when small business retailers could rely on selling their business for a handsome increase on the price they paid thereby providing a good pay day, when businesses sold for a good multiple of net earnings.
No more. Today, the best way to extract value from our businesses is to make every day your pay day, to not rely on your pay day being the day you sell the business. In fact, the typical shop today will sell for somewhere between 1.5 and 2 times actual net profit as shown in the business P&L.
The P&L matters as this is what you need to be guided by in all business decisions and actions.
The challenge is how do you do this?
Retailers need to look at their businesses differently. This starts with the mindset of every day being your pay day. Each decision needs to be considered in this context, in the context of the P&L impact.
Focusing on profit today will give you a better result today and make your business more valuable tomorrow.
Here are some suggestions for making every day your pay day:
- Run with the leanest roster possible. Just about every retail business we review has capacity to lower labour costs.
- Ensure you can sell when the business is closed. Yes, this means sell online.
- Promote the business outside your usual foot traffic area … increase your customer base.
- Promote your business outside the brand people know you as. or example, online pitch under a brand other than your shop brand.
- Have your best people working the floor, helping customers spend more.
- Have stunning displays that attract people from outside the shop.
- Have compelling displays in-store that encourage people to browse beyond their destination purchase.
- Always have impulse offers at high traffic locations.
- Charge more every time you can. Loyalty programs such as discount vouchers, bundling into hampers, multi buys such as 2 for 3 and other opportunities enable you to do this by blocking price comparison.
- Buy as best you can.
- take settlement discounts every time you are able.
- Measure product category performance by gross profit. Quit the categories that are not paying for themselves.
- Promote outside your store using online and social media opportunities.
- Leverage adjacency information. Chase a deeper basket – people purchasing more each visit.
Be responsible for the profitability of your business. Don’t blame your suppliers, your landlord, your employees or some other external factor … it all comes down to you – the decisions you make and the actions you take.
If you relentlessly pursue profit with a clear focus you are likely to see profit grow. That’s better than waiting to make money when you sell because that’s less likely to happen in this market.
Doing all this relies on your measuring the performance of your business. The Tower software helps with this. It is easy.