Look closely at a struggling business and you are sure to see some of these factors at play.
This article originally appeared in the May 2016 edition of INSTORE.
One of the difficulties with running any business is managing the juggling act of tasks — which ones are the most important to focus on at any point in time. It can be hard work trying to do everything and unless some sort of prioritizing happens then generally nothing gets done.
I’m often asked by jewelers what is the most important area of their business they need to focus on. Every store is different, but if I were to say what I feel are the most neglected areas (and the areas that can have the biggest impact on how their business could be improved) then I would list the following six things:
1. Not managing cash flow. Without a doubt, cash flow (or lack of) is the biggest contributing factor to business failure. One of the great benefits of being in retail is you can be receive cash upfront for goods that generally don’t have to be paid for 30 days. That’s also one of the great downsides. It’s easy to get trapped into spending the money now, forgetting that it needs to be earmarked for a future debt. Good cash-flow management is crucial to the success of any business.
2. Not having good staff communication. One of my favorite soapbox issues is holding a morning meeting with staff. Too few stores do it; those that do it consistently swear by its benefits. Your staff needs to be coached and informed on a regular basis.
3. Not building a strong relationship with vendors. When it comes to vendors, more is less. You need to do more business with fewer people. You become more significant to them and they will do more for you. Too often store owners weaken relationships by dealing with everyone. This eats up time and erodes your negotiating power. As I like to say, who wants to marry the girl who kisses every boy in town!
4. Not setting team targets. If you don’t know where you’re going, you are 100 percent likely to get there, but it’s not the recipe for business success. Again, the team that doesn’t know the score line doesn’t know what’s required of it. Every business should be clear on what is expected daily, weekly and monthly in sales and every team member should know what his or her role is in achieving this.
5. Not managing inventory properly. This is arguably the biggest area where businesses let themselves down and is a contributing factor to No. 1. I see too many stores creating pressure on themselves through bloated inventory levels that tie up staff time, tie up money and pressure margins — the lifeblood of profit. Which leads me to …
6. Not asking for enough profit. Too many stores don’t charge enough. I know this because I see stores charging more and making just as many sales.
These are my suggestions for the biggest priorities to focus on. Which ones apply to you?