HAVING COMPLETED THE four steps of the GAP Analysis (INSTORE, issues January-April 2008) this next step will help you to create a roadmap so that you can measure your progress towards your sales and profit goals. Remember, if you are serious about achieving your future wealth and retirement goals then please complete the four steps before continuing with Step 5 here.
Monthly Sales Analysis
Continuing on with our example of GAP sales of $1,062,265, we now need to break the annual budget down into realistic monthly targets.
Because not all months are created equally we need to divide the annual budget into relevant seasonal proportions. For example, December sales for most stores represent between 20 and 22 percent of total annual sales whereas other months can be as low as 5 percent.
We suggest you look over at least three years of sales-history trends to help even out any exceptional highs or lows (see Table 1 below).
In this table you will notice that for the month of June (highlighted), sales have ranged from 6.5 percent in 2005 to 8 percent in 2007 with the average being 7.23 percent.
Therefore, if the average June contributes 7.23 percent of total sales then your budget for next June would be $76,802 (7.23 percent of $1,062,265 equals $76,802).
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If you do not have history going back this far then either go back as far as you can and draw your own conclusions or use industry averages.
Please take into account any months with unusual trading patterns such as sales months, closed for refit etc. as these can distort the normal seasonal breakdown.
Daily Sales Analysis
We would also suggest breaking the monthly budget into a daily budget. The easiest way to do this is simply to divide the total budget by the number of trading days. For example, if the budget for June is $76,802 and your store is open for 25 days, then your daily budget is $3,072 ($76,802 divided by 25 equals $3,072 per day).
Table 2 (above) shows what a monthly breakdown might look like.
If you want to strive for best practice then your daily budget can be broken down among the sales team. For example, if Mary typically does 25 percent of the sales then her personal budget for June would be $19,201, or $768 per day.
Again, the easy part is setting the budget, the challenge is how to achieve it consistently.
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Action Steps:
- Calculate the average percentage contribution made by month using three years of historical sales data or industry benchmarks.
- Divide your annual sales budget by the percentages in Action Step 1 (as per Table 1) to arrive at a monthly budget.
- Get out a calendar and work out the number of days you will be trading each month.
- Now divide your monthly budget by the number of trading days (see Table 2) to arrive at a daily budget. We recommend you split your budget between the sales people so you can manage their activities and measure their results.
- Implement a daily team meeting. (We have notes on how to facilitate these Daily Edge meetings available free of charge.)
- TMT it. Test, Measure and Tune your strategies and results.
Congratulations on successfully completing Step 5.
