I was talking with a retailer the other day and was surprised to discover that they are advised of the profitability of their business twice a year, when their accountant meets with them, and even then, the information relates to a trading period from two or three months prior.
They have no processes in place to track and report profitability more frequently. They are not looking at GP% mix, say, weekly, looking for trends.
Their reasoning is that the accountant is the expert and that as the retailer they do not have the skills to understand the business performance at that level.
Not knowing business profitability at more frequent intervals and close to the actual performance is a problem for any business.
Gross profit is the pot from which the business pays rent, employees, loans and the owners. Not managing that in a timely manner can see a business slip away.
Too often I see local independent retailers get caught in a narrative no one has any money or the economy is really tough or we’re busier than ever or no that doesn’t sell. More than half the time the statements are checked with business data, which is rare in itself, the statements are not supported by the business data.
My point here is that what matters more than anything else about retail business performance is what business data report, your P&L, profitability reports from your POS software, your evidence. Your business data will guide better business decisions. Waiting a month or two for an accountant to provide their take on what they see is too long.
If you own a local retail business you need to be serious about your business data as it sets you up for trading profitably and selling more easily when that time comes.
So, are you making money in your shop?
Seek out that information and establish processes for you to have easy access to the information regularly. If you are not making money, your only option is to make changes in the business. There is never a real barrier to making such changes.
Fixing profitability starts with knowing where you are at.
Footnote: too many local retailers are drawn to gurus and smooth speaking experts when they ought be more locally and practically focussed on their business. Data is a boring topic, but it is the solid foundation on which valuable local small business retail success is built.