BUDGETS ARE LITTLE more than goals for the store to achieve, and they can go a long way to being achieved if they are written down and reviewed.
Budgets can serve a number of purposes: to keep costs under control, to measure performance against benchmarks, and to track staff and sales performance, just to name a few. Budgets can be conservative or optimistic – and neither form is wrong as long as you know why you are setting them. The most effective use of budgeting, however, is when the budget or goals of the business are tied to the needs of the owners.
Before setting a budget, it is important to prepare a GAP analysis – where the owner determines the gap between the business’s current performance and where he needs to be at the end of his remaining working life. A business owner with 10 years working life and $100,000 in savings will have a lot more work to do if he wants $1 million in retirement savings than an owner with $500,000 already saved and 20 years of working life ahead of her.
Determining your savings and lifestyle needs, and working backwards to determine the levels of profit needed to meet those needs (and hence the level of expenses, margin, sales and inventory you require to reach that profit), is the most effective way to set your budgets.
Some jewelry specific systems will provide you with a further budgeting breakdown by department so you know what sales and mark-ups you will require across each category. Still further, these budgets can be broken down to monthly and daily targets, so you can soon see where you are heading off course and take action to get back on track.
Business is a constantly changing game, and the recording and measuring of this information daily is crucial so you can take steps to be at the top of your game.
This story is from the January 2010 edition of INSTORE.