By David Brown Pulished in The Jewelry Business Magazine
By the time you read this, 2018 will have come to a close and you will be well into your new year of trading.
Right now can be one of the most important periods of reflection for any business. It is the ideal time to review what has gone right and what needs to improve from the last financial year. Taking the steps to rectify things now, while 2019 is still fresh, will give you the best opportunity to benefit from your review.
So, where do you start?
It’s easy to be overwhelmed by the amount of information that can be available but it’s important to focus in on the most critical things that will make a significant difference to your business. The 80/20 rule is alive and well especially at this time of year!
Start with your Month to Date Report for December. Given the significance of December in the total year’s trading it pays to spend some period of time reflecting on this area first.
Here are a few questions and things to analyze:
- How did your sales compare to December 2017
- How was your quantity of sales compared to last year?
- What was your average sale? How does it compare with prior years?
- What was your mark up? How does it compare with prior years?
It doesn’t get more basic than these four questions. Once you’ve looked at each of these areas, then delve into the departments
for each and determine which departments were responsible for the variations. Once you’ve studied the data by department then, you need to determine the reasons for the results. Ask yourself what were the improvements or declines.
Look at the most significant issues first.
If your mark-up is down by 1% but quantity of sales is down by 8% then address the quantity issue first.
Now, you’ve done this for the month of December, print a Year to Date performance analysis by Department. Do the same exercise for the full financial year. Are the trends the same for the full year as you saw in December? If mark- up was down for December but up across the full year then this may have been just a one month anomaly factored around your holiday promotional specials. If the trend for the year is the same as the month, or worse, then this is a sign of a bigger issue that need to be addressed.
At this point the quality of the questions you ask will determine what you learn – the better the questions the better the results. “Why is my mark-up down” is a good starting point but “ Why is my mark up on diamond earrings down when I have managed to purchase product at a better price?” will yield you a much better insight that can lead to meaningful improvement for your bottom line.
Once you’ve completed this exercise across all areas of your business, you should be able to come up with at least three areas for improvement in 2019 – any more than this and you will run the risk of being fragmented and not achieve anything.
Put in place the action steps you will take in each area (e.g. increase the mark up to be applied to diamond earrings or work on a sales strategy with staff to reduce the level of discounting in this area).
Now you have determined the changes to be made for 2019, you need to implement your sales plan for the new year. This will effectively be your budget by department and should reflect the improvement you expect in each area after allowing for the changes you plan to make.
It’s important not to complicate this process. If you are feeling overwhelmed pull back to just focus on one area until you have made the changes necessary. Business improvement is a series of small steps, not giant leaps. So, start slowly and work on sustaining the changes you have made.
David Brown
David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact inquiries@edgeretailacademy.com or Phone toll free (877) 5698657