Edge Retail Academy Blog

Retirement Strategies That Work

 

by David Brown

Let’s face facts … one day we’re all going to retire whether we want to or not!

Some of us will do it on our own terms when we are good and ready; some will be forced into accepting a modest retirement due to poor health or poor decisions while others will take their last breath behind the counter claiming until the end that it was their choice.

An effective Retirement Plan means – ‘Being in a position to retire, financially, emotionally, and physically … and then choosing whether to retire, or not.

Cash-flow is the name of the game in retirement …

To enjoy a fulfilling retirement, you need ‘reliable income’ or cash-flow more than you need capital. Of course, capital helps, but too often we see business owners having to live on less money and hoping they won’t outlive their money.

More often than not, people who retire will have a healthy attitude towards retirement i.e. they accept responsibility for their retirement and they have high, or at least comfortable expectations, and they back their expectations up with a solid plan and a sense of urgency.

Here are some questions for you to consider. If something happened to you today …

Q1: How would it impact the lives of those people left behind such as your significant other; your children; your staff; your customers or your business partner?

Q2: What would happen to your business if you were no longer able to manage the business or have a physical presence at your store?

Q3: Could you sell your business if you had to?

Q4: How would your retirement nest egg and lifestyle be looking?

What are your retirement options?

  • You can sell the business either to a family member (Succession), a manager or an independent third party.
  • You can have a GOB and close the business.
  • You can retain ownership of the business without you having to be there.

Before you go too far with any of these options, I urge you to seek guidance from a trusted Financial Advisor (not one who is trying to sell you an investment product) to establish your ‘required retirement income’. Once you know this number, you can work back from your other known income sources e.g. rental property, pensions, dividends, savings and other investments, to see how much you need from your business to top it up.

Let’s say you need $100,000 as a retirement income and you already have $50,000 from other sources, that means you need another $50,000 to come either from the capital you receive from the sale or closing down of your business or from an ongoing passive income from your business.

The biggest mistake retailers make is over optimistically valuing their inventory or the value of their business. Jewelry stores are not easy to sell nowadays, so it is rare to see them sell at a level that meets the owner’s expectations. With interest rates of approximately 2.3% for conservative investments (you can’t afford to be too speculative or bullish in retirement), you would need to clear in excess of $2m from your business to safely generate another $50,000 annual income for your retirement.

This makes the idea of retaining the business, what I call ‘exit without exiting’, a more attractive option. Why would you sell your business to a new owner who is going to get their money back in 4 to 5 years (based on an expected 20-25% return) while you take that same money and get 2-3% if you’re lucky.

What can you do to start preparing for Retirement?

Create some urgency no matter how far away you think retirement is for you. Tomorrow is not promised to any of us and ‘Hope’ is not a strategy.

Regardless of which retirement option you choose, they all require a degree of ‘grooming’ or ‘positioning’ the business to make it as attractive as possible to sell, close or keep.

This includes:

  • Maximizing your Net Profit.
  • Determining your Optimum Inventory Level (OIL) and aggressively targeting any aged or non-performing inventory. OIL is the level of inventory that is actually ‘needed’ to run the business, as opposed to what you have.
  • Re-ordering your fast sellers.
  • Starting to transition and delegate your own skills and responsibilities to others. Everything from the finances, inventory management, staff, marketing, personal sales and trade skills.
  • Getting your business in ‘ready to sell’ mode.

You need to empower, trust and enroll your team rather than doing everything yourself. Effective delegation takes time and it is not to be confused with abdication i.e. you can delegate tasks but not the responsibility.

It is wise to seek professional help along the way. Good legal advice can save you a lot of money and heartache just as good accounting advice can help resolve your taxation and compliance issues. Retail advice is also available to help you establish your retirement priorities and implement strategies to achieve them.

The first step in the retirement process is to set the timeframe i.e. when do you plan/need to be in a position to retire? And remember, hope is not a strategy and tomorrow is not a promise. Make it sooner than later.

Next, establish the gap between your required retirement income and what you currently have in place. Then it’s a matter of defining, implementing and monitoring your retirement plan.

If you need further help with strategies and advice around this topic, please contact The Edge Retail Academy at Inquiries@EdgeRetailAcademy or 877-569-8657, Ext. 1.

Clienteling

Today’s retailers are faced with the difficult challenge of keeping shoppers engaged. The marketplace is larger and more competitive than ever before. If you could increase your sales by 20% or more, would you like that? Of course you would! Would your sales people be happy to know that they could increase their sales by 20% or more and earn more money? Of course they would! Stores that increase their sales each year, rely on clienteling, to ensure success.

The power of clienteling is real. It is purely an extension of continuing the rapport with your customer. If you merely call them back when they call you, you’ve slipped into a passive role. Understanding and meeting their needs is only part of the successful sales dynamic; it’s essential to monitor the relationship with frequent contact to make sure your clients are still happy with the product or service and to address new needs that arise.

To get the best results in doing this, your staff will need to have a clienteling system and excellent time management. This may employ different tools and techniques to adapt to these positive changes.

Below are suggestions on improving their time management. Remember we are looking for the greatest “return on effort” to improve their time efficiency, which in turn will give you a better “return on investment”.

• Do paperwork before and after the key selling hours
• Keep the number and length of breaks to a minimum
• Hold lunches to a reasonable length
• Avoid slow starts in the morning and quitting early in the afternoon
• Resist the impulse to stop selling when:
a. The weather is good or bad
b. Sales are off
c. Sales are good
• Stop personal business during the prime selling time
• Delegate the nonessential service or work that can be turned over to the support staff
• Be cautious about taking on jobs that reduce your selling time without adding to your sale success

Analyze the results on any of the above and make the changes that will save you the most time. Saved time equates to more selling time and that’s where productivity through better time management pays off.

Four Key Customer Groups

• Female Self-Purchasers
• Male Special Occasion Buyers
• Bridal Customer
• Repair Customer

Clienteling Message

Be sure you have the right message in the right medium. Do your clients prefer a phone call? A Text? An Email? Something in the mail? Find out!

Service:
• Create traffic and sales through service-oriented contact.
• When clienteling is executed appropriately, it’s all about servicing the client.
• If clienteling is just about a sale, it’s just about YOU. It must be about doing something for the customer.

Convenience:
• Make it easier and more efficient for people to do business with you.
• Stay top of mind – when people remember the relationship and experience in your store, as well as the contact you make, you will be their 1st choice!
• Maintain a gentle presence just in case they need you.

Women vs. Men Buyers

Women are browsers and impulse shoppers:
• Make sure they’re browsing in YOUR store!
• Create service calls just for these customers.
• Every time a woman comes into your store you have the opportunity to:
• Sell her something (for herself or others)
• Perform a service
• Get to know her better
• Update her Wish List

Men are not shoppers, they’re buyers:
•Easy
• Quick
• Every time men come into your store:
• Know what you’re going to show him before you call him
• Don’t turn a buying trip into a shopping trip
• Offer solutions, not just suggestions
• Ensure he’s “successful” and “the hero”

Practice makes perfect. If you are not contacting your customer to earn their business…you can bet another company is! Help your team learn how to effectively clientele, and they will be more successful. If you need further help with training your staff on this topic or any other area, to ensure more sales success, please contact The Edge Retail Academy at Inquiries@EdgeRetailAcademy or 877-569-8657, Ext. 1.

How to Successfully Launch New Product

by Becka Johnson Kibby

You’ve searched the show floor. You’ve purchased the perfect product. You’ve put together a merchandising plan. You’re excited about it!

Now what?

Investing in new product is exciting! But only if it sells. With proper planning, you can ensure it sells. When you purchase new product, there is a lot of planning that must take place prior to receiving it in your store. When it arrives, don’t just put it in your case and hope it sells…have a plan!

Launch it to your staff first

Schedule a training time – a breakfast training or after store hours training works really well. This sets it up as special and captures the team’s attention to focus on the details of your new collection. Your goal is to create excitement and entice the staff to sell it! If possible, ask the vendor to be there for the training, so they can do part or all of the training for your team – no one knows the line better than the vendor! Train on the background of the collection, the history, the designer’s philosophy and inspiration, etc… Mention any exclusivity that you have or know who else carries it in your area.

Train on all the product knowledge that is needed for this new line:

  • Metal purity and alloys
  • Additional metals available?
  • Clarity, color, cut of diamonds/gemstones
  • Finger size range available
  • Craftsmanship of the pieces
  • Special Order / Custom lead times

Coach on how to tell a story:

  • How to tell the customer about the collection
  • How to show this collection is different
  • How to get the customer excited

Show all the associated materials:

  • Brochures
  • Online catalog
  • Boxes
  • Displays – and how to set it up

Share the marketing plan:

  • Vendor co-op program?
  • Mailers
  • Email campaign
  • Social media, Website
  • Store signage

Role-play!

  • Don’t let this part slip.
  • It is important for your team to talk about the new product with each other before doing this in front of a client.

Unveil the collection:

  • Let everyone touch, feel and try-on the pieces!
  • Save this for the end, as you start losing your team’s collection once you take the product out to see in person!

Vendors can assist in the launch

Ask your vendor for any assistance they can offer for a proper launch of the new line. They may be able to help with some of the following:

  • Contests (sell the 1st piece, sell the most, etc…)
  • Gifts
  • Jewelry giveaways
  • Earn points to buy jewelry
  • Trip
  • $$$
  • Invitations for your event

Your vendor wants you to be successful with their product, so ask if/how they can help. Teamwork = Success!

Offer Incentives when you first launch a new product. This helps form habits by getting your team to remember to show it and learn how to talk about it. Your incentives can be retailer driven, vendor driven or a combination of both.

Launch it your clients

Next, launch it to your clients. Throw a party. Ask the vendor to attend. Invite VIP customers to your store to unveil the new line. Call customers that you know would enjoy the new collection. This way, they feel special, as they get to see if before other customers know about it.

When the party is happening, engage the clients – help get them excited. Create wish lists. Give away swag bags. Really make it a benefit for them to attend.

Give the clients an experience they will remember! This is key, as it will get them to come back more often. Make sure they are left with a feeling of “Wow…can’t wait to come back and shop here again”! Amazing experiences stick with us and help remind us to go back again…and again.

Having A Budget Mindset

 

by David Brown

Good budgets don’t need to be complicated, but they do need to be thorough to make sure they cover your short, medium and long term financial requirements.

The main driver of an attainable sales budget increase is a clear understanding of the required/desired profit needs of the business and its owners.  For example, it is possible to increase sales by 10-15% and still lose money because that increase has been achieved through discounting which has resulted in less gross profit and increased costs.

We suggest starting with the end in mind e.g. spend some time thinking about how much profit you want and then translate that to the amount of sales you need to deliver that bottom line result.  We call this process ‘The GAP Analysis’ which is simply a metaphor to help you identify the gap between the required financial performance of your business and the current performance.

When considering how much profit you need, be sure to include your retirement/exit plans (including a timeframe), the market salary for your role and an appropriate return on the capital you have invested in your business (a 26% return on your capital is appropriate).

Once you add all these together along with your normal operating expenses, you will know how much Gross Profit you need to generate.  This will then form the basis of your Sales Budget e.g. if you need $500,000 of gross profit to deliver your required net return and your gross margin is 55%, you would need to do sales of $910,000.

Even putting this process to one side, we truly believe that if you are not aiming for a 20% increase in sales, you are not aiming high enough.  If that sounds unrealistic, please consider just some of the many ways to achieve this:

  1. The average store has a close ratio of around 18% – that means that 5 out of every 6 people walk out empty handed and disappointed.  By making 1 extra sale from every 10 people (10%) who are walking out, you would increase sales by 40% to 50%.
  2. Most stores make 50% of their sales from just 4% of their units …  Return on Effort.  Typically, around 200 items makes up 50% of your dollars so if you could sell another 200 of these (or similar) items, you could increase sales by 50%.  That is much easier to achieve than selling another 5,000 items, which makes up the other 50%.
  3. Most stores have 1 (sometimes 2) Top Salespeople who produce far better results than the rest of the team.  Clients tell us “if we could just find another Sue, our business would take off”.  What Sue proves is, it can be done.  And if she can do it, others can too.  Too many stores put up with their hiring mistakes and let non-performing people take the place of the next Super Star.

Some other budgeting tips …

When determining your budget, it helps to disregard historic figures and look at the potential the business has.  When deciding what is possible for your store one of the most significant factors to consider is the size of the immediate shopping precinct.

Another factor is how much competition is there for the sales dollars, not only amongst other jewelers in the area, but also other unrelated stores who will encroach on your customer base?

Thirdly, what is the size of your own customer database and is it being tapped to its full potential?  An under-utilized database is often the most valuable potential any business has, and with the cost of acquiring new customers increasing, for many jewelers it is the only affordable way to drive traffic.

Next, think about new opportunities within your business e.g. you may be looking to build your Diamond business or introduce a new Prototype range.  The reason you are making these changes is to increase sales so make sure they are added to your sales budget.

Lastly, and most importantly, when setting a budget, look at the limitations you may be imposing on yourself.  Get excited about the things you can influence i.e. everything that happens inside your store, and ignore the things you can’t influence i.e. everything that happens outside your store, such as the global economy or local unemployment.

It’s time to demand more from your business and for yourself!

If you would like to speak further about how we can help you set a budget or need more strategies on how to achieve some growth in your business, please contact Becka Johnson Kibby, 877-569-8657, Ext.1

What’s Trending

Edge Pulse and Aggregated Data

At The Edge Retail Academy, we aggregate data from close to 800 stores, through Edge Pulse. This allows us to give you up-to-date and meaningful reports and stats. Take a look at some of these stats below…

Diamond Engagement Rings

 

How do your Engagement Ring sales compare to the Average Store sales? This aggregated data indicates a decrease in sales by 1.7% with an increase in the average sale being $1,969 and average discounting down, at 28%.

 

Diamond Engagement Rings

 

How do your Diamond Wedding Band sales compare to the Average Store sales? This aggregated data indicates an increase in sales by 10% with an increase in the average sale being $1,146 and average discounting down, at 22%. Great News!

 

Future Growth Projections

by David Brown

This article will help you to create a roadmap so that you can measure your progress towards your sales and profit goals. It is important to achieve your future wealth and retirement goals.

Monthly Sales Analysis

Following our example of ‘GAP’ Sales of $1,062,265, we now need to break the annual budget down into realistic monthly targets.

Because not all months are created equally we need to divide the annual budget into relevant ‘seasonal’ proportions. For example, December sales for most stores represents between 20-22% of total annual sales whereas other months can be as low as 5%.

We suggest you look over at least three (3) years sales history trends to help even out any exceptional highs or lows – see Table 1 below.

help even out any exceptional highs or lows – see Table 1 below.

Month 2014 2015 2016 Average
$ % $ % $ % $ %
January          48,750 7.50      52,500 7.00      51,000 6.00        50,750 6.77
February          45,500 7.00      52,500 7.00      59,500 7.00        52,500 7.00
March          42,250 6.50      48,750 6.50      55,250 6.50        48,750 6.50
April          45,500 7.00      52,500 7.00      59,500 7.00        52,500 7.00
May          42,250 6.50      48,750 6.50      55,250 6.50        48,750 6.50
June          42,250 6.50      52,500 7.00      68,000 8.00        54,250 7.23
July          42,250 6.50      48,750 6.50      55,250 6.50        48,750 6.50
August          45,500 7.00      52,500 7.00      59,500 7.00        52,500 7.00
September          48,750 7.50      56,250 7.50      63,750 7.50        56,250 7.50
October          48,750 7.50      56,250 7.50      63,750 7.50        56,250 7.50
November          55,250 8.50      63,750 8.50      72,250 8.50        63,750 8.50
December      143,000 22.00    165,000 22.00    187,000 22.00     165,000 22.00
Total Sales:      650,000 100.00    750,000 100.00    850,000 100.00     750,000 100.00

 

In this table, you will notice that for the month of June (highlighted), sales have ranged from 6.5% in 2014 to 8% in 2016 with the average being 7.23%.

Therefore, if the average June contributes 7.23% of total sales then your budget for next June would be $76,802 i.e. 7.23% of $1,062,265 equals $76,802.

If you do not have history going back this far then either go back as far as you can and draw your own conclusions or use the Industry averages.

Please take into account any months with unusual trading patterns such as sale months, closed for remodeling, etc. as these can distort the normal seasonal breakdown.

 

Daily Sales Analysis

We would also suggest breaking the monthly goal into a Daily Goal. The easiest way to do this is simply to divide the total sales goal by the number of trading/selling days. For example, if the budget for June is $76,802 and your store is open for 25 days, then your daily budget is $3,072 i.e. $76,802 divided by 25 days equals $3,072 per day.

Table 2 below shows what a monthly breakdown might look like:

Month 2016 Goal Running Totals Trading Days & Ave $
$ % $ % # $
January 71,915 6.77 71,915 6.77 25 2,877
February 74,359 7.00 146,274 13.77 23 3,233
March 69,047 6.50 215,321 20.27 25 2,762
April 74,359 7.00 289,680 27.27 25 2,974
May 69,047 6.50 358,727 33.77 24 2,877
June 76,802 7.23 435,529 41.00 25 3,072
July 69,047 6.50 504,576 47.50 22 3,139
August 74,359 7.00 578,935 54.50 23 3,233
September 79,670 7.50 658,605 62.00 24 3,320
October 79,670 7.50 738,275 69.50 24 3,320
November 90,293 8.50 828,568 78.00 22 4,104
December 233,698 22.00 1,062,265 100.00 23 10,161
Total Sales:    1,062,265 100.00    1,062,265 100.00 285 3,727

 

If you want to strive for ‘Best Practice’ then your daily goal can be broken down between the sales team. For example, if Mary typically does 25% of the sales then her personal goal for June would be $19,201or $768 per day.

Again, the easy part is setting the sales goal, the challenge is ‘how’ to achieve it consistently.

Action Steps:

  1. Calculate the average percentage contribution made by each Month using three years of historical sales data or Industry Benchmarks.
  2. Divide your annual sales goal by the percentages in Action Step 1 (as per Table 1) to arrive at a monthly goal.
  3. Get a Calendar out and work out the number of days you will be trading/selling in each month.
  4. Now divide your Monthly goal by the number of trading days (as per Table 2) to arrive at a daily sales goal.
  5. We recommend you split your sales goal between the sales people so you can manage their activities and measure their results.
  6. Implement a Daily Team meeting, to keep everyone in the loop and on track.
  7. ‘TMT’ it. Test Measure and Tune your strategies and results.

If you would like help with setting goals for maximum performance from your team as well as strategies in helping you achieve your sales goals, please contact Becka Johnson Kibby, 714-925-2456 or Becka@EdgeRetailAcademy.com