REPEAT AFTER ME … I resolve to:
1. Devise an advertising plan and budget and keep it going all 12 months long. Everyone I have spoken to this year that was doing well was either in a fabulous location or they were constantly advertising. Plan on spending a combination of rent and advertising that equals 13 percent of sales. So if rent is four percent, spend nine percent on advertising. Take that number and divide it by 13. Spend 1/13th of the total every month; spend 2/13ths (double) in December.
As written in the book The 33 Ruthless Rules of Local Advertising, you should use audio (TV or radio) along with visual advertising (billboards, newspapers, direct mail). No matter what, allocate some of your dollars to direct mail.
2. Reduce my inventory to have a total value at cost not to exceed the total amount that I sold from the case last year.
Can’t pay off all of your vendors this January? You bought too much. Your inventory levels shouldn’t be any more than what you can sell in a calendar year at cost. If you sold from the case (special orders and memo have to be taken out of the equation) $300,000 at cost, and you have $450,000 sitting in the case that you own, and you have a 50 percent gross profit margin … you can only pay for the $300,000 that you sold.
At this level your product sales would need a 66 percent gross profit margin to pay for all that didn’t sell. That means all products would have to be sold for triple key. Sorry, doesn’t happen, but that’s what you would need to pay for what’s still sitting in the case.
So what to do if this is you? Dump the extra $150,000 in inventory. Send it back to vendors, spiff it, and sell it at cost. Do whatever to get inventory levels down to cost of goods from the case equal to last year. If you keep it that way, you’d find this next Christmas: The amount you owe and can’t pay this year would be sitting in your checkbook with nothing to do in January, 2004.
3. Change my sales staff over to an incentive-based pay program. Your sales staff is already on commission now, just divide their W-2 by their sales. If they made $27,000 and sold $192,857, they received 14 percent of every sale. They are on 14 percent commission!
A salesperson should receive at least 50 percent of their paycheck from commissions. Anything less and they will have no incentive. If you put them on 100 percent commission, as we did, they could have a killer day! If your staff can never have a killer day (commission-wise) then they will always be “Can I help you?” type salespeople.
In the example of $27,000 and $192,857 in sales, this person should have received $19,857 in wages (at 10 percent commission). This assumes the employee is allowed to sell all customers, not if you as the owner handle all big sales and only let them sell batteries and gold earrings. In this example the salesperson should have sold about $270,000. A system that’s not 100 percent commission could have paid the person five percent of all sales (including repairs) plus an hourly wage of $6.50. This would be an incentive for the saleperson to make some serious money and the store’s cost of sales would be at the level for better profits (10 percent, give or take).
4. Attend a Harry Friedman seminar. I’ve written several times about how Harry’s seminar changed my store. In three days you’ll learn how to set goals, coach the sales staff and get things done. Harry changed me from a mediocre commission (two percent) plus wages to 100 percent commission. Sales jumped 45 percent that year.
5. Raise my prices on all repair and custom design prices by 20 percent. I see it all over. Two reasons why jewelers don’t do so well: 1. Too much inventory; 2. Not charging enough for services. Less than five percent of customers walk when you raise your repair prices (I’ve done the survey, folks). Still scared? If you charge $10 and do 100 jobs you’ll take in $1,000. At $12 you only need to do 84 jobs and you’ll still take in the grand. Would 16 people leave your store for a lousy $2? I don’t think so.
6.Turn over my payroll to a payroll service rather than doing it myself. If you really looked at the time and hassle, it’s worth it to not have to touch a 941, 940 or state form ever again. For a small fee, companies will print checks and pay your taxes. All you do is place the paperwork in a binder, which they furnish. I use Paychex. You’ll save money because your bookkeeper won’t need a whole day to do payroll.
7. Open up a 401k retirement plan for myself and my employees. One of the best ways to keep staff. It used to be the owner of a small company couldn’t put away more than six percent of what employees put away collectively. Now the laws have changed. Check out Paychex, where I signed up for mine.
8. Computerize my Point of Sale program and my accounting program. If you have inventory and customers there’s no way you can have a superbly run store without computerizing these two items. Some POS systems have accounting inside but more and more are going to no accounting and linking with QuickBooks.
9. Plan out this coming year’s sale by month and decide what we must do to get those sales. Don’t wait for customers to come in. Track last year’s sales by month and add in this year your increase. Post the numbers needed week by week on a bulletin board and keep track daily. You’ll be amazed what you’ll do “to make the numbers”. Call customers, add ons, make a deal, promote. It’s all goal-oriented.
10. Plan a minimum of two one-week vacations out of town for me and my family. No one can have a fresh idea and feel 100 percent with customers and employees if they’re always stressed out. It’s usually slow the week of April 15. Plan a getaway now for then.
This story is from the January 2003 edition of INSTORE