by David Brown
Now what could that be?
Where has all my profit gone? Why is it hard to find good staff? How do I stop my competitors from discounting so much? Where will I spend my summer break?
All good questions, but not as important as the question that gets to the heart of self-employment. Whether you are a jeweler, baker or candlestick maker, asking yourself of you are in business is the question that will lead you to the number one ah-ha moment.
Do you have a business or have you bought yourself a job?
Most jeweler probably ask themselves, at one time or another, why they are in business – and some days, they might have trouble finding an answer! For many, it’s the appeal of self-employment, which brings with it greater control over their working life and better profits than an employee can earn. Your future is in your hands – not the hands of anyone else.
Often getting into self-employment can be an emotional decision rather than a logical one, and can be driven by a desire to get away from pain (a job they don’t enjoy) rather than a move towards pleasure. Many lack the necessary skills to work effectively at this level. It has to be said, however, that few people who work for themselves ever have a desire to go back to working for someone else – the pluses do outweigh the minuses.
Sadly, many jewelers don’t receive sufficient return for all the hours of effort and dollars of working capital they invest. To illustrate, here is a quick exercise using a hypothetical store:
Sue earned $70,000 from her store this year, including a salary of $50,000 and a profit of $20,000. She paid $250,000 for the business two years ago and believes it to be worth the same today. She works 50 hours per week (approx. 2500 hours per year).
Based on a 25% return on investment (ROI) on her $250,000 purchase price, Sue would expect an annual return of $62,500 from owning the business ($250,000 x 25%). This figure represents the 25% she deserves for the risk she is taking, compared with the return on risk-free investments such as bank deposits or government bonds. (Although this represents a greater premium over non risk rates than a few years ago, it would be fair to say business has become much more risky during that time!)
If Sue deducts the $62,500 that she should earn on her investment from her total income ($70,000) she is left with a figure of $7,500. This is Sue’s “pay” or the reward she gets for the effort she has put into the business. If she divides this by the number of hours she works per year, or 2500, then she is effectively earning $3 per hour to manage the store ($7,500/2500). Sounds a bit low, huh?
Would Sue find someone who would manage her store for $7,500 per annum? Not likely! Yet many owners ask this of themselves every year. Sue is not earning nearly enough for her labors and her initial investment. All she has managed to do is to buy herself a job – and a poor paying one at that!
Sadly this situation is all too common. Sue has kidded herself that she has a profitable business, yet, if she invested her money elsewhere and went to work for someone else she would be earning a lot more without the hassle.
If you’re in a similar situation are we suggesting you sell your store? No. You need to turn these circumstances around.
How can Sue turn that job into a business that works for her?
The biggest difference between a successful store owner and an unsuccessful one is the ability of the owner to concentrate on what is important rather than what is urgent.
This means doing the tasks that will move the business forward, the types of tasks that will earn $100 or more an hour indirectly – for example: 1) financial planning, 2) effective inventory budgeting, buying & management, 3) creating marketing plans, 4) revising pricing and 5) not fiddling with urgent but less important tasks that can easily be completed by a staff member, such as fitting watch batteries.
In order to do this, an owner needs to plan and continually ask themselves the question, “Is this the best use of my time?”
Here are a few guidelines to help make your time more productive:
Step 1 – Preferably on Sunday night or Monday morning, review all goals and priorities for the week ahead. At times like this, it’s not all about reducing costs; it’s about setting goals to increase profit margins, clearing aged inventory, increasing sales, improving team communication, re-ordering fast sellers and so on.
Step 2 – Prioritize. Choose one or two tasks that can make the greatest amount of difference in the shortest amount of time. Write them down.
Step 3 – Plan when to take action on these tasks. Ideally break tasks down into 1-hour blocks. Everyone can find an hour to concentrate on a key task, but many struggle to find three hours out of a busy day. Also, choose a time of day with the fewest interruptions. Early in the morning is best.
Step 4 – Plan where to take action. Choose somewhere private with no distractions and with all of the things required to complete the task. Sometimes doing important tasks at home, first thing each day, is more effective than trying to do them at the store.
Step 5 – Schedule or delegate the task. Wherever possible, give things to someone else to free up time to move to the next item of business. Remember, delegation is not abdication.
Step 6 – Use discipline and self-control to follow through and complete each task. Mark it off and celebrate any successes with a coffee and a five-minute break.
Step 7 – Repeat these steps each week and review them each day.
Some careful planning can make all the difference. As Abraham Lincoln once said, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe”.
It’s time to sharpen your axe!
If you are in need of advice on time management, leadership, or any other strategies to make these things happen in your store, please contact us to help through our mentoring program. 877-569-8657, Ext. 1 or Becka@EdgeRetailAcademy.com