Hi, my name is Mark Fletcher. While here at Tower Systems we make POS software for local small business retailers, I also provide support advice to retailers. I was asked to write an article recently for a small business retail publication. Thinking about a shop I had visited recently and how the performance of the business did not match what the owner thought, I decided to write about how a busy shop can lie to you. Here is the article:
Do you get to the end of the day exhausted from how busy the shop was and feel good about the business? When I bought my first shop, I loved being exhausted by the end of the day. I thought being busy equalled success.
The thing is, a busy shop handling many low-value, low-margin transactions in a day is likely to exhaust you more than a far quieter shop handling fewer transactions at a higher value and with a higher margin.
Now, for simplicity, when I talk about margin here, I am talking about gross profit. This is what you sell an item for, less the cost of the item to your business.
The most important truth about the performance of any business is in the profit and loss statement. This is where everything comes together. On one side is all your sales revenue. On the other side is the cost of stock purchased, along with all other costs such as labour, rent and overheads.
Set yourself up to get easy access to your profit and loss statement yourself without needing to go through an accountant. This is easy to do, especially if your point-of-sale software feeds sales data and inventory purchase invoices direct to the accounting software. Being on top of performance has never been easier.
If your business features low-margin, low-transaction value products, look at opportunities to increase margin on those products and sell more higher price point items with better margins.
The price you charge should reflect what you offer. If your business is convenient, shoppers are likely to be comfortable with a higher price than they may pay elsewhere. If you offer a value-addition, such as differentiating product knowledge or follow-up servicing, this should be considered when setting pricing.
On initial consideration, this may feel too difficult to achieve. I have seen retailers think this, only to realise that they were the barriers to deciding what might work in their shop.
A while back, I was helping a retail business that was rooted in that low transaction value, low margin world. I suggested they add a product category their type of business was not known for. They did, and it was a success. Today, that initial change has led to a complete business transformation, delivering a much-appreciated profit multiple that they could not have achieved had they not changed.
In retail today, there are no rules demanding your business stay in a lane defined by the shingle above your door. By disrupting expectations for your type of business, you can create more success for you and all who rely on the business.
Don’t be duped by your business. Feeling tired is no measure of success. The only measure that matters is the one reflected in the financial statements of the business.
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