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Laurie Owen: Critical Steps

Laurie Owen tells you how to prepare if economic times get rocky.




EVEN THOUGH, AS OF this writing, the experts still haven’t made the official call that we’re in a recession, prudent owners will want to “storm-proof” their businesses for the rest of the year. As you struggle to manage costs, find new sources of revenue, and operate more efficiently, it’s always good to remember some basics.

1. Stay on top of your cash situation. Take time to prepare cash-flow projections for the next 12 months, and revise weekly if needed.

2. Know your margins and turns by department, by product line and by SKU. If you don’t have this information, upgrade your system. If you do have this information, but can’t use the reports, get advice so you can. Phase out the lines that either are not turning or not generating the margins you need.

3. Monitor accounts receivables closely. Process invoices immediately, distribute an outstanding accounts receivable statement weekly and take action on late accounts immediately. A few days improvement in collections will make a huge difference in cash flow. Make a vow to get rid of in-store accounts by the end of the year.

4. Insist on good financial data. Accurate, timely financial statements are critical in tight economic times. Don’t accept excuses from your bookkeeping staff. If you’re doing your own books, fire yourself, hire it out, and make better use of your time.

5. Get funding now! The worst time to get financing is when you are about to run out of cash. Arrange for loans and lines of credit before you need it. Your cash-flow projections from tip No. 1 will help you figure out how much you’ll need and when you can pay it back.


6. Review your long-term financing. Are you financing long-term growth (or assets) with short-term funding such as a credit line? If so, see your banker about getting refinanced.

7. Have good advisers and use them. Make sure you have a solid team of outside advisers. Meet with them regularly and listen to what they say.

8. Don’t turn financial decisions over to others. There’s no need to turn yourself into a CPA, but you must be able to read financial statements, talk with financial people and assess your company’s performance.

9. Understand and use break-even analysis. Do you know your contribution margin? If not, you won’t know how much more you need in sales when costs rise or prices fall. You also won’t know how much to cut if and when sales fall.

10. Know your clientele and your price points. You say you are a “high end” store. Is that based on wishful thinking or does it match your selling history and market area? Does your marketing plan (and inventory mix) make sense for your market?

Remember, as John A. Shedd once said, ships are safest in harbors but that’s not what they’re made for. Don’t let fear of the future paralyze you now. Get moving and do something!


Money Math

How Do I Know It’s Worth It

Let’s check the math. Suppose your annual purchases total $1.25 million. Let’s also assume that 80 percent of these purchases are subject to a 2 percent discount. So, 2 percent of $1 million? That’s $20,000 of reduced costs. And the effective annualized interest rate of not taking the discount? You earn 2 percent by paying in the first 10 days. But if you don’t take the discount, it costs you 2 percent for each of the remaining 20-day cycles in the year (18 in all). That’s an annualized interest rate of 36 percent!

This story is from the March 2008 edition of INSTORE.



When the Kids Have Their Own Careers, Wilkerson Can Help You to Retire

Alex and Gladys Rysman are the third generation to run Romm Jewelers in Brockton, Mass. And after many decades of service to the industry and their community, it was time to close the store and take advantage of some downtime. With three grown children who each had their own careers outside of the industry, they decided to call Wilkerson. Then, the Rysmans did what every jeweler should do: They called other retailers and asked about their own Wilkerson experience. “They all told us what a great experience it was and that’s what made us go with Wilkerson.” says Gladys Rysman. The results? Alex Rysman says he was impressed. “We exceeded whatever I expected to do by a large margin.”

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