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Making Business Succeed, Part One: Winning at Retail
Empty-Shelves-Thin

Here is an article published in the July 2013 edition of the Maine Eagle, a local community magazine serving the central Maine area. Get your free copy today at many stores and local businesses.

Read The Maine Eagle Magazine monthly to enrich your life with Maine's best read.



What You Don’t Know May Put You Out of Business

This month I’m beginning a four part series of articles that will offer useful tips and insights for businesses in four major Maine industries. Today I will talk about how retail businesses can prosper in the current difficult business environment.

The following three articles will cover the service sector, farming/fishing, and finally the tourism/hospitality business. Combined, these four industries account for over half of Maine’s economy.

My purpose is to create an Encyclopedia of easy to use, readily available tools and practical knowledge to help small business succeed. What you don’t know may put you out of business. As an MBA I was specifically trained to offer exactly this kind of advice.

Now, let’s talk about how a small retail business here in Maine can succeed in the long run:


Inventory Management: Empty Shelves Cost You Money
The best run retail business in the world is Wal­‐Mart. Wal­‐Mart knows, in real time, what’s selling and what’s not. Look closely at their stores and you will seldom see empty shelves.

It costs money to have shelves just like it costs money to have a store. Your store will cost you money even if you sell nothing. Trying to save money by cutting product selection is exactly the same thing as trying to make money from an empty shelf. You can be certain that the rate of return on an empty shelf in your retail store is precisely zero.

I’m ignoring the “bad vibes” and negativity your customers will feel when they see empty shelves.

If a given product doesn’t sell find another. Keep searching and keep changing your product mix until you maximize both sales and profits.

 

Dust on Inventory: It’s Nothing to Sneeze At
Take a quick tour of your store and check for dust on inventory. Dust is a sign that product is sitting there and not selling. Your customers either don’t want it at the price you charge or they don’t know your store has this item. Slow­‐moving product costs you money because you had to pay to get it and you have to pay again to keep the item there on your shelf. Most product loses value with time and may go out of code requiring you to throw it out. The dust wins if you let this happen.

Consider this simple story about two products sold by a retail store. Assume you make the same profit from selling each product.

Product A sells for $365 and your store will sell exactly one of them per year.

Product B sells for $1 and your store will sell exactly 365 of them per year.

Which product is better and why?

The answer is Product B which sells for $1. Although the annual sales and profits for your store would be the same regardless of which product you stock, Product B will generate a steady stream of sales while Product A will sit there on the shelf for a long time. Finally, Product B will bring in 365 times more customers than Product A, giving your store greater opportunities to sell other items to them.

Time is money. And dust on your products is a sign that time is passing.

 

Why Are You Failing? Or, Why Are You Succeeding?
Many people complain about the high taxes here in Maine. And it’s true that for four years in a row (as of September 2013) Forbes magazine has ranked Maine dead last as the worst place in the country to have a business. But remember that income taxes are a burden only if you have income. If your business loses money you won’t have a tax problem. Instead you will have a business problem.

What’s wrong with your business? This may be the most important question you are required to answer in your life. You took tests in high school or college. Now, Reality is giving you a test. Will you pass?

You think you’re busy? What are you busy with? Busy­‐work or the ultimate success of your business? Long term thinking must begin somewhere. Maybe you need a time out for a day. Think, study and analyze what’s wrong and develop a plan to fix the problems.

Are you doing well? Congratulations. Why? How will you continue to succeed? What is your strategic business plan? Success that derives from mere luck is worthless in the long run. The best forms of success are by-products of good design, not good luck.

 

The Value of Information: QuickBooks Point of Sale
Pattern recognition and exploitation are crucial to retail business. What were the top ten selling items in your store last month? What were the lowest ten sellers last month? What do you mean you don’t know! Why not? Find out. Wal­‐Mart excels at pattern recognition and configures its inventory based on this type of knowledge. With QuickBooks Point of Sale you can do the same.

You may disagree. You may not like QuickBooks Point of Sale software (or any other equivalent software) But your competitors like it. And they will implement it. They will outperform you and your business. In the long run they will succeed. You, by stagnating and doing nothing, will fail. Why do this to yourself and your business? The logic is simple: get better or get nothing.

See here for more information on:


QuickBooks Point of Sale Software

 

The Crucial Importance of Store Layout
How you layout your retail store determines how much time a customer will be in your store, what he or she will see, and the chance they will find what they want. When a customer is inside your store, your store is inside their minds. Make the most of it.

Effective store layout accomplishes two goals simultaneously:


(1) Maximize accessible convenience for those customers who know exactly what they want (typically gas, cigarettes and lottery tickets);


(2) Maximize the length of the path an average customer must follow to get what he or she wants. Wal­‐Mart and Hannaford don’t put bread, milk and  pizza next to one another. There is a reason for this.


Store layout is both an art and a science. Get this right so your retail store has the greatest possible chance to succeed.

 

Math is the Answer to Everything
Einstein said “Mathematics is the language of the Universe.”

Math is one of the few things I believe in. You can count on it (pun intended.)

Your retail business is a system of inter­‐related equations which determine success or failure, profit or loss.

For you, the difference between profit and loss may be just a small percentage multiplied by a very large volume of happy customers. Profit is achieved by better thinking.

You can gain insight into your store by understanding its gross profit percentage, the number of times its inventory turns, what it costs you to borrow money to setup and finance the store, the cost of payroll (including all taxes plus workers compensation), and finally the profit the store pays you the owner. These numbers matter because they determine the destiny of your store.

Insight will allow you to rise up above the seat­‐of­‐the­‐pants intuitive level of thinking most small businesses use and see the whole picture. Seat­‐of­‐the pants thinking fails more often than not because of the following important equation:


Pretty Good ≠ Good Enough


It was the philosopher Ayn Rand who famously said:


“Wealth is the product of man’s capacity to think.”

 

Think. And succeed with your business. What’s the alternative?

 

 

LEGAL DISCLAIMER

George Adams
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
450 South Main Street: The HQ of IQ
Brewer, Maine 04412-2339

©2015 Copyright George Adams CPA MBA. All Rights Reserved.

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Contact Me

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Telephone: (207) 989-2700
Email - georgeadams@intelligenceforrent.com
Address: 450 South Main Street: The HQ of IQ
               Brewer Maine 04412-2339

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