Feb 22, 2012
Improve Gross Margin
Issue: February, 2012
Why Some Businesses Make 42% Gross Margin and Others Make 50%
By David McMahon
Gross margin has always been a big challenge for many retail businesses. When I tell them that their margins are underachieving their typical response is always,
“I’m in a very competitive market”.
That excuse does not fly with me.
Unless you are a monopoly, all businesses are in a very competitive market. Who isn’t? Whether you are competing against the 3 stores down the street or your customer’s new car that they want to buy, the market is competitive. And still some in ultra competitive markets get high margins and many get low margins.
With the competition excuse dispelled I’m going to list some reasons why businesses underachieve in gross margin produced:
- They really believe the competition excuse and can’t get past that.
- They cost plus price only.
- They cost plus price improperly for special orders because they don’t include indirect costs.
- They buy new merchandise too fast.
- They are over inventoried.
- They have across the board sales.
- They sell on price.
- They pay straight commissions only.
- They don’t price point properly.
- They don’t package price properly.
- They don't use any target pricing.
- They don’t target cost when shopping at market.
- They price across the board.
- They don’t look at the price tags when the merchandise goes to the floor.
- They don’t have a private label program.
- They have too many big name vendors.
- They price from MSRP down.
- They don’t shop their competitors.
- They have a low warranty, fabric protection, and mattress pad close rate.
- They have an underachieving average sale.
- They don’t review margins often enough on their system reports.
- They don’t read purchase advice and sales performance reports often or properly.
- They run out of best sellers.
- They have no real sales or inventory management in use.
There are more but you get the idea. So, what do the companies with decent margins do differently?
They mix things up. They have a variety of pricing strategies. One size does not fit all. They understand that, “MARGINS ARE ONLY IN YOUR HEAD”.
I tell people that a low gross margin is the easiest problem to fix unless you are massively over inventoried. It takes review of your current systems and procedures, education, and implementation of dynamic and robust operations. (If over inventory is the issue that needs to be fixed at the same time). If you want some specific ideas for your business, please contact me!
Jan 19, 2012
Think Profit!
Published in Jan/Feb 2012 Issue of Furniture World Magazine
There is only one way to be successful in business. It’s to Profit.
There is only one way to build cash in the bank. It’s to Profit.
And, there is only one way to grow your business. It’s to Profit.
Profitability sometimes takes a back seat to sales. It should not. Sales volume is a critical and necessary part of the profit equation, but it is just a part. Cash is only accumulated through the consistent spread that is made after the sale of an asset. That spread, or bottom line, needs to be in the 7%+ area every year to nicely accumulate cash. Profit fuels growth. It is the driver of even higher sales and higher profit volume levels. This is because growth comes from investing in great people, inventory, facilities, systems, training, and marketing. The least expensive and least risky capital for this growth investment comes from equity in the business. And equity comes from either profit or an investor’s pocket. The alternate source of funds for growth is debt. I think you will agree that it is far more enjoyable to use profit to perpetuate business growth, rather than paying off loans.
In the real world of retail, I’ve seen thousands of financial statements: the great, the so-so, and the abysmal. One commonality is that businesses always have room for improvement. And also, the smallest improvements can have massive impacts on profitability. This article will cover the basics of how to analyze one of the three critical financial statements: the Profit and Loss (the other two not presented are the Balance Sheet and the Statement of Cash Flow).
CASE STUDY
At left is a sample furniture store P&L. This version of the Profit and Loss statement called a common-sized statement, enables analysis with past periods, with peer companies for performance groups, and with the industry as a whole
Company Background
- Family owned and operated.
- Full line furniture, no electronics or appliances.
- One store operation with one detached warehouse.
- Family owns buildings separately and business pays rent.
- 25,000 square foot showroom.
- Eight salespeople, one sales manager.
- Average sale = $1,350; traffic count for 2011 = 18,519; close rate = 20%.
- $1,000,000 average inventory at cost.
- Vendor merchandising - mid to upper.
- Special order percentage = 50%.
- Budgeted sales 2011: $5.26 Million.
Analysis & Ratios (Reference Red Numbers on P&L Above)
1. Sales to plan? 95%=($5.26M/ $5M). Sales fell short of budget by $260,000. This company needs to look for specific reasons why this occurred. Was the plan too ambitious? Were there operational factors? What can be done differently for 2012.
2. Sales per square foot? $200 = ($5M/25,000). This is a very average number. Many special order type operations selling medium to high end merchandise have results in the $400 plus range. This company needs to investigate merchandising mix, traffic counts, and the effectiveness of its sales force.
3. Number of customers per salesperson per monthly average? 193 = (18,519/12/8). This number indicates that the business is understaffed and can make improvements in sales management. Special order type operations that focus on sketching, room planning, and home design operate in the area of 100-140. This alone could be what caused sales to underperform to plan.
4. Inventory to sales? 20% = ($1M/ $5M). This business is on the verge of being over-inventoried. Efficient operations will typically hold an average inventory of 15% of sales. That accounts for $250,000 less in stagnate asset purchases. Inefficiency also contributes to lower sales numbers and a higher expense structure. This company should implement better inventory management systems. Examples are open to buy purchasing systems, merchandising systems, and mark down systems.
5. Gross margin is 44% of sales. This company is outright throwing away 3-6 percentage points. This could be rectified through a variety of methods which may include: special order pricing guidelines; better and more creative price pointing; a quicker turning mark down system; variable commissions on gross margin; improving warranty, fabric protection, and mattress pad conversions; more appropriate cost multipliers on vendors and categories; package and group pricing.
Underperforming margins are the easiest problem to fix unless the operation is extremely over inventoried (25% Inventory/Sales).
6. The occupancy and advertising expense combined percent of sales? 15% = (8%+7%). Look at these two figures together because higher occupancy cost correlates positively with high traffic locations that require less advertising expense. Conversely, a destination location requires a greater advertising expense to pull people in. Whatever the situation, the combination of the two can never go above 15% of sales. That usually indicates that a retail operation is not viable unless gross margins are 55%. This operation is on the cusp. Details of the rent paid to the owners and marketing expenses need to be evaluated if this current sales level continues.
7. Are proper selling incentives and pay for performance programs in place? Almost 9% of sales is okay if the business is hitting sales targets and producing a healthy bottom line. This business is not. The company should consider putting a program in place that leads to higher margins and a faster turning inventory.
8. Service percent of sales? 1%. This seems at least half a point high. Are vendor credits getting processed? Perhaps there are excess damages because of higher inventory levels or some other operational issue. They should investigate.
9. Delivery percent of sales? 1.76%. It’s a good policy to offset delivery charges against delivery expenses. If this is being done, then the charges will sometimes cover the expenses. There may be opportunity of up to 1.5% in the delivery department through either charging proper setup and delivery fees or utilizing delivery staff and resources better.
10. Total operating costs as percent of sales? 41.96%. At 44% gross margin, this leaves only 2.04% in profitability before interest expense and taxes. That’s not much to work with. 37% is an EBIT (earnings before interest and taxes) that operations should strive to achieve.
11. Earnings before taxes (EBT)? 1.54%. As far as the industry is concerned, this is low to low average profitability. Growth will be difficult at this level as there is only $52,000 in cash that is generated from operations that will go into equity for the year after taxes are paid.
Consistently operating at this level can cause liquidity issues in the short term and solvency issues in the long run if there is ever a sudden down turn.
The numbers used in this article are similar to a real furniture operation. In the past year I’ve seen businesses like this that have improved to a double digit bottom line before taxes.
You might ask, “So, what would happen to the bottom line of this company if the right improvements were made?”
Great question! First, they need to be 100% committed and invest in the proper help. They could then improve their selling system to reach their sales target, take inventory management actions to get gross margin to 47%, and make slight adjustments to their merchandising, service, and delivery departments. Doing this would produce an Earnings Before Taxes of over 13%, or more than $700,000. The after tax net income would be close to 9%, or over $460,000! That’s why it is worth it to “Think Profit!”
David McMahon is a Management Consultant with PROFITsystems and a Member of the Institute of Management Accountants. If you would like him to do a similar analysis on your financial statements so you can increase profits, you can contact him at davidm@profitsystems.com.
Jan 17, 2012
Ways to Increase Sales and Become Remarkable
Here are the slides to a webinar I delivered in the Summer of 2011. This webinar strikes at the heart of what most business people want – to increase sales! The key I believe to making this happen is to becoming Remarkable.
I give a whole bunch of practices and ideas that people can use to make this happen. I focus on using PROFITprofessional software as a sales management tool. As well, I give many ideas beyond software systems.
"Advertising is a tax that you play on being unremarkable."
What this really means is that businesses should seek to differentiate themselves in advertising AND that advertising is NOT a be all end all solution for increasing sales. Becoming remarkable is!
Dec 19, 2011
Dec 6, 2011
iPad and App Revolution Coming To Furniture
Published Article in Furniture World December 2011 This is what I've noticed happening in the past year: small business owners started appearing at trade shows and in their businesses with iPads. I realized that these were the same people who couldn't be tied to their PC's for more than 15 minutes at a time. They were the first in line to sign up! It's really amazing how a group of people who were arguably the most technically challenged and data phobic became the embracers of innovation. This is what the Internet was like 15 years ago. Everyone at that time was talking about getting a website (and every 3 years they still talk about getting a new website). What is happening now is that apps are becoming similar to websites. Let's think about this for a moment. What are websites? They are gateways to your business. I'm going to make another prediction. Within 5 years, 99% of you reading this will have your own app. I think that you can see what I'm seeing now, right? If you and your customers are using these new devices and platforms, you will want your customers to be able to reach you on them. You will want their iPad to connect to your business instead of your competitor’s business. Apps: The New Gateways But apps aren't web sites. Apps are simpler. They are faster. They are more focused on tasks and results. Amazing. To me that sounds like what a website could only dream of being. You may ask, "People can go to my website now on their iPad just by using a browser; why will I need an app?” That is true; they can. And it is also true that people prefer apps. For news, someone could just go to CNN.com on their iPad, right? Well, they don't. They download the app for CNN and interact with that. When furniture or kitchen shopping, people could go to ikea.com on their iPad but instead they are downloading the Ikea catalogue app and interacting with that. americanleather.com is still on the Internet, however, the app is beautiful and functionally superior on the iPad. Why navigate a site when you could interact with an app? So, to get your creative juices flowing, here is a sampling of business productivity apps that my consulting clients and I are using: Pages - word processing by apple. MS Word compatible. Cloud storage. 2X Client or Jump Desktop RDP - control your PC on your iPad and access your Macintosh or Windows-based software system from anywhere. There is no longer a need to ever leave your customer. PDF Reader - easy to read and present PDF based documents. Cloud storage. Facebook, LinkedIn, Twitter - the leaders in social media. Yelp - customer reviews. By the way, encourage your customers to post here. Sketchpad - sketching is proven to increase average sales; iPads are proven to grab consumers’ attention. Combine the two. Icovia - room planning on the go. Free your salespeople. Empower your customers. Pandora - if you control the music, you control the mood of the room. Measures - take a picture of a room, note the measurements, and send an email. Calculator - when you need this app a sale is just around the corner. The Brick by Imagiu - take a picture of a room and place furniture in that room. Browse inventory items. See the latest promo. Maps - don't get lost. Roambi - this is a business intelligence (BI) app that I use to help clients view their critical metrics from anywhere. This puts your key sales, inventory, and financial figures literally in the palm of your hands. BSC - balanced score carding is an app that I use to help clients set strategic objectives and smaller goals to help them achieve their objectives. InFlowchart - ever wonder if there was a more efficient process? This is an app that I use to create and display custom business operation charts for clients. American Leather - see what innovative manufacturers are doing. FaceTime - free video and teleconferencing between iPad and iPhone devices. There are too many others to mention. The speed of app download is like a rocket. Apple sells over 30 million apps per day. Consumers have spoken. The iPad has changed the way business is done. All aboard?
by David McMahon
I bet that 99% of you reading this article either have an iPad, an iPhone, or will have an iPad or iPhone in the next year. I also bet that your customers are like you. 
The Brick by Imagiu - take a picture of a room and place furniture
in that room. Browse inventory items. See the latest promo.
They are gateways that run on the Internet platform. My belief is that the Internet platform is metamorphosing. It is changing because of the devices that consumers and business owners are now using: mobile devices, iPads, iPhones, Android devices. People have made it loud and clear that they don't want to be tied down and wired in. They want to be free, wireless, and connected through the cloud. Apple and Google have led the way and it's not stopping. iPad and Android devices are the new platforms. The Internet is just their invisible platform - their cloud.
Square - take a credit card payment anywhere any time.
Nov 30, 2011
The Non-Computer Year End
David McMahon, Senior Business Consultant
Published in November e-Communicator
The end of a year really has no meaning in itself when applied to business. It is just a point in time on a calendar that signifies that we have made yet another lap around the sun in 365 and a quarter days. It can really be at any time in the year.
This is what year end really means in business:
It is about reflection on the past 12 months.
It is about awareness of the present.
It is about preparing for the future.
Reflection. There is really only one use for the past when it comes to business. It's there to learn from. People and businesses learn from success and failure. In fact many say that success is built upon failure. The end of the year presents a time whereby you can stop and reflect. You can tally up what worked over the past year and what did not. Here is a exercise that we often go through with our consulting clients.
List your top 10 vendors in terms of inventory investment
List the top 5 in terms of GMROI (gross margin return on investment)
List the bottom 5 in terms of GMROI
Do the same thing with categories
Ask, "What made the best work? And how can we make the worst better?"
Rank all salespeople by sales volume
Then look at average sale, number of ups, and close rate
Ask, "What made our best people work and how can we help the other team members improve?"
The Present. This is a gift you should give to yourself. You can learn from the past but present time is where the seeds of success are sown. I advise my clients to focus on where they are now with respect to these top business success drivers:
Break even sales volume
Gross margin
Inventory mix - both level and type
Profitability
Cashflow
You have two options here: know where you are currently in all the above drivers - good, fair, or bad, at all times. Or, be ignorant of the present and leave your money on the table. The gift of the present is a vital part of your future. Embrace your numbers.
The Future. Do you think anyone arrives at their destination if they don't really have a destination? How can they arrive if they don't know the way to get there?
Year end is a great excuse to organize your plan for the upcoming year. This plan needs to be quantitative. You should consider the core business indicators and then document the plan in the form of a budget. These are key elements that we consider while financial planning with our consulting clients:
Sales levels, average sale, close rates, and traffic
Gross margin
Administrative expenses
Occupancy expenses
Marketing investment
Selling expenses
Warehouse and delivery income and expenses
Finance income and expenses
Profitability
Variable and fixed expenses
Break even
Inventory levels and purchasing
Asset purchases
Loans
Payable levels
Cash flow projections
After we discuss each area, we ask, "Where do you want to be? What is realistic?" Then the steps to get there are set. The path is laid out.
If this sounds like a lot to do on your own - we can help you. Our business consultants at PROFITsystems provide a CFO service that can be your guide.
This year, try doing a non-computer year end as well.
Don't wait for another lap around the sun.
Nov 21, 2011
Flexible Budgeting For Furniture Retailers
Published in Furniture World
October 2011 Issue
by David McMahon
We have all heard the saying, “A failure to plan, is a plan to fail.”
Most home furnishings retailers don’t have a plan. I did say most. The best operators do plan. They use budgets to help them react faster to unforeseen situations in the future. A quantifiable plan is a budget.
To introduce you to the value of budgeting, this article will show you how you can use a simplified “Flexible Budget” to assist with your operational forecasting.
This process is called “Flexible” because your planned level of sales may change due to unforeseen factors. For example, if your local economy is dominated by a large employer that suddenly lays off half of its work force, there may be a spillover effect on your business. Flexible budgeting allows you to prepare better for the unknown. Read the full article in Furniture World.
Jul 25, 2011
CFO Outsourcing is now available!
To help small business owners get the high level of financial expertise that big corporations can afford, we are now providing CFO Outsourcing.
In the past 15 years, after visiting hundreds of operations, we have seen that small businesses, for the most part, have "questionable" financial information. In many cases, their financial statements are ignored all together. For those that do produce financials, very often they have "materially misstated" information. Businesses wait for their tax accountant to prepare their annual return. By that time – it’s far too late! The prior year is long gone.
Do you agree that no one can properly run their business successfully for the long term like this?
If you think that your business is at risk, then we can help you.
To schedule an appointment at the Las Vegas Market to discuss CFO Outsourcing, contact Wayne at wayne@profitsystems.com or David at davidm@profitsystems.com
Click the link below to view some frequently asked questions:
CFO outsourcing FAQ.
If you are not going to Las Vegas this market, and would like to discuss, please send us an email.
Mar 21, 2011
Retail Break Even Analysis
Lower your breakeven point and hang on to your cash reserves.
Financial Management by David McMahon
Article in April Issue of Furniture World Magazine
During the recent recession, high exposure to risk forced lots of good retailers to go out of business. The culprit in many instances was high fixed costs relative to total costs. When consumer spending suddenly slowed, businesses were unable to respond in time. These retailers simply fell uncontrollably and quickly beneath their break-even point of sales. Losses were incurred, and eventually their cash flow dried up
Many businesses did survive the recession and remain profitable. They are the businesses that have a greater proportion of variable costs (lower fixed costs), and, therefore, shoulder less risk. You see, businesses with more variable costs in lieu of fixed costs are less susceptible to sudden changes in sales volume. Variable costs rise and fall in proportion to sales and result in a lower break-even point of sales. This gives retailers an advantage over their competition in that they have more time, or room, before their cash reserves are depleted during a sudden sales slump.
This article will demonstrate how to calculate your break-even point of sales. It will also provide some real world examples of ways smart retailers are reducing their break-even points. Finally, at the end of this article is an offer to get a free break-even calculator that you can use to improve your business.
So, what is the formula for break-even sales?
Article in April Issue of Furniture World Magazine
Feb 19, 2011
e-tail Management
Published in Furniture World Magazine - Jan/Feb 2011 Issue
Operations Management by David McMahon
About a year ago, my wife decided that she wanted to redo our kitchen. The first stage was dreaming and visualization. To get help, she googled “kitchen planning”. She chose to use Ikea’s Home Planner as it seemed the best for her needs. As her design progressed, she started to source specific items. These included appliances, cabinets, flooring, lighting, wall tile, furniture, countertops, and trades people. She googled many hours into the night.
Her product search worked basically like this, she started general and then got specific. At first she browsed broad categories of merchandise (online and then in-store). Then she narrowed it down to specific vendors and exact models or styles. Once she found her favorite items, she googled vendor model numbers. Local lists of retailers that carried these items appeared on Google. She visited these sites and signed up to receive their e-newsletters. She then checked each piece to determine the best price and availability of merchandise. When she needed more information, she either used live chat or called the retailer’s customer service number.
Now she was ready to buy. She bought from several different retailers. In some cases, she visited their physical stores to make some purchases. In other cases, she bought directly from the web site for convenience. The majority of her purchases came from local retailers where both their merchandise and prices were listed on their web site. However, two appliance purchases were made from a retailer based in New York. All items shipped directly to our home in San Diego for a total of $59 in delivery charges.
This example is typical of the shopping behaviors of 30-something home goods consumers. It illustrates why your web inventory strategy should be the most important part of your overall advertising program because it will determine your future traffic and sales success.
- Google should be your most important advertising network.
- Getting your product listed on Google quickly is vital. It increases the chance that consumers will visit you when they are ready to buy, increasing your traffic.
- Consumers know how to use room planners. You need one and you need to learn how to use it.
- Consumers do shop online before they visit a store.
- Consumers search for specific vendors, models, features, and styles. An up-to-date catalog of the merchandise you carry needs to be on your e-tail site. Your customers may get lost on your site (and disappointed) if you display merchandise that you no longer carry.
- Your customer will be comparing you to your competitors who carry the same models.
- Consumers will buy online and offline. However, in many cases, they will find you first online.
- There is little loyalty to brands or retailers. Top customer service, availability of product on your site, fast delivery, and great prices are all expected. If you do not deliver that, consumers will use Google to find someone that does.
So, how can you take advantage of these lessons, beat your competition, and capitalize on higher traffic that leads to better sales? By executing the 5 SMART steps.
Jan 20, 2011
Pay For Performance Webinar
Thank you for attending today's webinar.
For those that attended you can email questions to davidm@profitsystems.com.
Per the request of some attendees, I've posted links to my slides. Here are you go:
PFP Webinar
PFP Example Worksheet
Dec 31, 2010
Happy New Year 2011 !
I’m sure that you are like me and are looking forward to a very rewarding year in 2011.
I want to help you get off to a great start.
Knowledge is power. It can be motivating. It can lead to fantastic ideas. It can be a catalyst for success. Building it is a gift.
With the gift of knowledge in mind, I compiled some of my favorite articles that I wrote for various industry publications. I’m passing them on to you.
Please let me know if an article or this post spawns an idea that you wish to put into action. Or, just let me know if you want some direction in helping you reach your 2011 goals.
I wish you the best in 2011!
Sincerely,
David W. McMahon
Business Profitability Consultant - "Keep learning, innovating and advancing"
PROFITconsulting, PROFITsystems
Select articles for you:
Dec 13, 2010
Pay for Performance - It’s a path to success!
“My bottom line is 14%.” That was what a member of one of our performance groups modestly reported recently. “Wow!” and “How?” That was the reaction from the audience.
In a time when businesses with decent profitability are reporting around 5% net income, this company is at the top of their game. Are they just lucky? Are they an anomaly? I think not. I’ve seen similar break out performances many times – in ALL economies.
It comes down to this: to win you must create a business environment that breeds success – everywhere.
You see, a prime reason why top performing companies outperform their average performing peers is they pay extra when their people achieve better results. These successful businesses align their self interests with their employee’s self interests. They have a well executed Pay for Performance strategy (PFP). They understand that everyone deserves to make money – especially when they make the business money.
In this article we will look at how to create a winning PFP strategy for your furniture business. Be sure not to miss Chart #1 on the following page. It provides detailed examples of how you might implement your strategy.
The goal with PFP is to reward performance on the upside, above normal performance levels. This is not intended to replace your regular salaries or bread and butter sales commissions. It is intended to focus people’s attention on helping you accomplish certain business objectives. PFP costs you nothing if executed correctly since you only pay when productivity is increased. Best of all, it gives people a vested interest in your success by focusing their attention on your organizational goals. There are five basic steps to implementing a winning PFP strategy:
Step #1
Set Performance Objectives
“I don't care how much power, brilliance or energy you have, if you don't harness it and focus it on a specific target, and hold it there you're never going to accomplish as much as your ability warrants.” ~ Zig Ziglar.
Goals and micro-goals are the basis for PFP. You must know specifically where you need improvement to establish proper goals. Furthermore, you must know specifically how to make that improvement. For example, suppose you realize that your warranty close rate averages 10% on sales that can have product warrantees. Knowing that the best performing operations can close over 90%, it tells you that this is an area of opportunity. Set a performance objective to improve warranty sales. If you achieve this micro-goal, your bigger goals of increasing sales and gross margin could also be realized.
Step #2
Determine The Payment
Once you have your target set, you need to define the motivating element. Define the “carrot” for the “rabbits” to chase. This should be customized to your situation and your people. It could be money, paid time off, merchandise, dinner vouchers, sports’ tickets; you name it, and don’t be afraid to be creative and fun. Let’s say that you interview your sales associates and find that cash should be the “carrot”. And just for fun, let’s make this a team PFP program. After working the numbers, you decide to pay $1,000 per quarter to all sales associates for a 10% increase in the warranty close rate over the previous quarter’s close rate.
Step #3
Define How It Works
Keep it simple. Have the performance metric and term of measurement clearly defined whether it be a month, quarter, or year. Have the people that are responsible for performing, track and measure the metric that you are trying to improve every week. This will keep you moving toward your target. By measuring along the way, you can see if changes in strategy, methods, or further education are needed. When it comes time to assess the final measurement, you will already know if you have obtained the result that you were seeking. In our example, at the end of the quarter, if a close rate of 20% is reached, the team gets to split $1,000. This is all to the up side. There is no loss to the business. Everyone is happy. If not, try again next quarter or make a change to the program.
Step #4
Add, Drop, Change, Replace
Like merchandise, like employees, like vendors, like all things, some PFP programs will work better than others. If you create one that everyone likes, performance clearly improves making it easy to manage. You’ve got a winner. Let your winners run. On the other hand, if you have a PFP program that is not producing the desired results, change it if the metric is important. However, don’t be afraid to drop and replace programs to change the focus of your goals as your organization changes. Let’s say that you get your warranty close rates up to 70% on a consistent basis and you are happy with that; the effort that it might take to get it up to 90% might not be worth the time. Instead, you may decide to discontinue that program and replace it with a PFP that focuses on increasing average sales per individual. Keep your PFP strategy dynamic.
Step #5
Set The Rules
Think of it like a game. Be creative. Keep it simple. Keep it fun. Let others keep score. Results are reported to you – pay when your goals are realized. Cheaters are penalized.
Include Everyone
One important thing to understand when creating your PFP strategy is ALL departments and business partners should be included. Don’t leave anyone out. Improving sales metrics is not the only factor that contributes to increased cash flow and profitability. Every area, from purchasing to accounting, should be considered. You should even consider giving a bonus to your vendors and customers for exceptional performance.
To stimulate your creative side, check out Chart #1 below. You can take these ideas, customize them for your business and people, and get started on producing a PFP strategy.
David W. McMahon is an inventory management and operations expert. Questions about any aspect of retail operations management or for help implementing the 5 SMART Steps in your business contact David care of FURNITURE WORLD at davidm@furninfo.com
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