HOUSEKEEPING TIPS TO DO NOW

BY RITCHIE SAYNER ADVANCED RETAIL STRATEGIES

With 2022 now in the rearview mirror, it is time to reflect on what worked well and what needs improvement in the coming year. Consider the following guideline for housekeeping items as you begin 2023:

Health

Make this priority No. 1. Without good physical, mental and financial health nothing else really matters. If you can’t take care of your own health, taking care of your business health is going to be difficult, if not impossible. Staying healthy involves proper nutrition, exercising regularly and getting plenty of rest. This sounds basic and perhaps even trite, but you would be surprised by the number of store owners who don’t take care of their health and pay a hefty price as a result.

Is your business financially fit? Now is the time to assess your financial health. Are you cash-flow positive? If so, did you plan to be that way or did you get lucky? Lady Luck can be fickle and turn against you quickly. Doing a cash-flow plan regularly is a simple exercise that can quickly reveal where potential problems exist. If you do not have a good cash-flow form, feel free to contact me for one.

One warning: In most cases, if you continually use current season sales to pay the previous season’s invoices, you have a problem!

THINK LONG-TERM

Most of us get so wrapped up in solving immediate problems (aka, putting out the small fires) that we do very little long-term planning. I bet many of you will spend more time planning your vacation than you gave thought to the first quarter of 2023, let alone two to three years from now.

Mike Alic, Management One President, summed it up perfectly by saying, “If you don’t lay the foundation for the next big thing in your business today, you won’t be ready to make the move tomorrow.” Examples that require longterm planning might include a remodel, a new space, adding another location, a new POS system, overhaul of your website or a major shift in personnel, to name a few. What long-term projects are you currently planning?

Operating Expenses

January is the absolute best time of the year to review the year-end profit and loss statement. This document is too critical to your ultimate success to be simply filed away. You should have industry benchmarks for all major expense categories as well as initial markup and margin expectations. You will want to make sure your year-end results are in line with industry averages and there is a sufficient spread between gross margin and total expenses. If you are not comfortable reading this statement or how to interpret its results, we can easily show you in 5 minutes. All you have to do is reach out.

Inventory

When it comes to reviewing inventory, there are several considerations at year-end. Reviewing the existing class structure is a logical starting point. Does the current category hierarchy fit your existing business? I review class structures regularly for stores. What I typically find is they rarely change. It is not uncommon to find classifications in a system that has had very little if any activity for years in some cases. These should be eliminated.

On the other hand, sometimes a category or class has grown to the point that the data provided is so cumbersome the information is of little value. This would be an example of a class that should be broken down into smaller, more controllable sub-classes. Planning at a smaller level allows the merchant to make better buying decisions and identify potential problems more quickly. If you have taken a year-end physical inventory, January is a good time to reconcile the inventory. Make certain you know where and why shrinkage problems exist. Without this knowledge, you can’t address the problem. It is also a good time to review any procedures related to inventory accuracy. This could include transfers between stores, receiving practices, how customer returns and vendor returns are handled and if markdowns are being recorded properly.

Vendors

Now that the year is complete, the current resource matrix should be evaluated. If you are a store that finds itself overbought often, perhaps you are carrying too many vendors. This can also lead to duplications in assortment, which is a major contributor to profit-eating markdowns. Supply chain disruptions, customer service and shipping accuracy need to be taken into account. Use a vendor scorecard that takes into consideration not only sales, but margin and ROI (return on investment). This is an excellent tool for vendor negotiations if needed.

Staffing

Another important area to review is current staffing needs. Do you have the right people in the right seats on the bus, as Jim Collins describes in his management book, Good to Great? A great employee will not help the organization in the best way possible if his or her talents are not utilized effectively. Good sales associates do not necessarily make good managers and good buyers don’t always make good merchandise managers. All these positions require completely different skill sets.

The points just provided make a good template to begin planning for 2023. Any of these topics would provide excellent material for management meetings. By reviewing these six major areas and implementing any needed changes, you can set up 2023 to be a banner year.

Ritchie Sayner

Sayner has spent the past four decades helping independent retailers improve profitability. In addition to speaking to retail groups nationwide, Sayner is a regular contributor to retail industry publications. Prior to embarking on his retail consulting career, he was the general merchandise manager for an independent department store in the Midwest. Ritchie is a graduate of the University of WisconsinLaCrosse. He is also the author of the book, “Retail Revelations-Strategies for Improving Sales, Margins, and Turnover.” He can be reached though his website at www.advancedretailstrategies.com. @RitchieSayner