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Laurie Owen: Learn What It Takes To Be Top Dog

First part of three-part series: To be in the Top 25% for efficiency in all areas will help you earn the most money.

Published

16 years ago

July 1, 2008

Laurie Owen Instore July 2008 Issue

EACH YEAR, we take the financial statements of our performance group members and sort them by how much owner’s discretionary profit (ODP) they make as a percentage of sales.

ODP is defined as net profit before tax plus owner compensation, divided by sales. This measures the profit of the business before the owner decides how much compensation to take out.

We take this top quartile and label them the “Top 25%.” This year, it took a minimum ODP percentage of 15.1 percent to make it into the Top 25%, or in other words, they had to keep at least 15.1 cents in ODP for every dollar of sales they generated.

Their secret? Efficiency. While there was no one single factor causing the additional profits of the Top 25%, managing expenses more efficiently in every area paid off big time.

The biggest impact was in cost of goods sold, which includes merchandise, freight and labor for craftsmen or repair people. Best practices require buying the right merchandise for the right cost, controlling inventory shrinkage and setting the right price. These practices led to a gross margin that was 2.6 percent higher than the “all company” group. If you apply this 2.6 percent difference in margin to median sales of this group of $3,418,410, the result is over $88,000 in additional profits.

Their expenses were lower in all other key areas, including:

Selling expenses of 16.9 percent of sales, or 1.4 percent lower
Occupancy expenses of 4.5 percent of sales, or 0.4 percent lower
General and administrative expenses of 8 percent of sales, or 4.4 percent lower

Added together, this 6.2 percentage difference in total expenses resulted in $212,000 in additional profit. Most of the savings came in lower general and administrative expenses, specifically lower administrative and support wages.

All sales categories were represented in the Top 25%, with companies over $8 million representing only 10 percent of the top performers, even though they represented 18 percent of all study participants. Con-versely, companies with sales under $2 million represented half of the Top 25%, even though they represented only 20 percent of the companies participating in the study.

This story is from the July 2008 edition of INSTORE.

This Third-Generation Jeweler Was Ready for Retirement. He Called Wilkerson

Retirement is never easy, especially when it means the end to a business that was founded in 1884. But for Laura and Sam Sipe, it was time to put their own needs first. They decided to close J.C. Sipe Jewelers, one of Indianapolis’ most trusted names in fine jewelry, and call Wilkerson. “Laura and I decided the conditions were right,” says Sam. Wilkerson handled every detail in their going-out-of-business sale, from marketing to manning the sales floor. “The main goal was to sell our existing inventory that’s all paid for and turn that into cash for our retirement,” says Sam. “It’s been very, very productive.” Would they recommend Wilkerson to other jewelers who want to enjoy their golden years? Absolutely! “Call Wilkerson,” says Laura. “They can help you achieve your goals so you’ll be able to move into retirement comfortably.”