AS THE OLD saying goes, you can only manage that which you measure. Given we are fast approaching the busiest time of the trading year, it’s a good time to review those key metrics that will contribute to a successful trading result. You don’t achieve a strong profit by pursuing the end result in itself; that’s a little like winning a championship just by rocking up at the trophy ceremony. You need to achieve goals along the way that will add up to the end result you want: a successful December.
These are a few key metrics that will help give you that result you desire.
1. Sales per staff member — Achieving your December targets will come down to identifying the key people who can hit the home runs. Who are your best salespeople? How can you provide them with more opportunities to shine?
2. Discount per staff member — Who’s giving away the most profit? Every dollar of discount comes off the bottom line, and at the end of the day, it’s not the sales you make but the money you keep that matters the most.
3. Average sale to average stock holding — You can generally only sell what you have. If you are targeting an average sale in diamonds of $2,500 but your average inventory holding value is only $1,900, then your options for achieving this will be limited.
4. Stock turn — Have you got sufficient inventory to achieve the sales goals you want to achieve? Where are you overstocked? Where are you understocked?
5. Markup — Are you making enough money from each sale to cover your costs and provide you with a profit? Which leads to…
6. Return on investment — Your ROI reflects the capital you have invested. Are you earning enough of a return for the risk and effort involved?? Given low interest rates, the alternatives are not particularly attractive, but your payback needs to be commensurate with the money you have tied up and your risk of not having that capital returned to you.
7. Replacement cost — With recent increases in the price of gold and silver, many of your items will be more expensive if you order them back in. Does your retail price reflect the need to do this, or are you giving this saving away to your customers?? Retail prices should reflect replacement cost as much as ordered in cost.
8. Return on marketing spend — What’s your advertising outlay? How many dollars of sales or profit do you expect for each dollar spent?
A successful coach knows a winning game consists of achieving the key metrics along the way. Running your business is exactly the same.