Retail Observer

RETAILOBSERVER.COM APRIL 2015 40 Elly Valas Retail Views RO I n 1996, I bought my first copy of The Complete Runner's Day- By-Day Log Calendar and now I'm into the 2015 edition. I don't run much anymore but it's a handy place to track my walking, bike riding and weight training. As I started my new 2015 calendar I browsed through some of the 19 previous logs that I've kept. Because my logbook is always handy, I also note my travel, golf outings, weather events and weight in it. In looking back, I see that I've gained ten pounds in the 21st Century, but lost six in the last year and a half. In 2000 I met that year's goal to exercise more than four times a week but recently, I've fallen a bit short. My 2015 target is to work out five times a week. When I had my stores, I kept track of different things. Every month, I sat down with my financial statements and computed my key ratios— Gross Profit Margin; Net Profit Margin; Inventory Turns (Cost of Goods Sold ÷ Inventory); GMROI (Gross Margin $ ÷ Average Annual Inventory. My goal was 2.);Current Ratio (Current Assets ÷ Current Liabilities which should be 2:1); Quick Ratio (Cash + Accounts Receivable + Short Term Securities ÷ Current Liabilities which should be 1:1); Cash Ratio (Cash ÷ Current Liabilities which should be .20:1); Debt to Equity (Total Liabilities ÷ Total Equity). Along with sales and inventory, I entered the numbers into a spreadsheet—first manually, and eventually in Excel. I made this exercise my priority every month. It was the most valuable half hour of all. Computing the numbers myself and entering them onto my monthly spreadsheet made certain that I took time every month to analyze my business. It would have been easy to have my controller do it for me or for my CPA to do it once a year, but that wouldn't have guaranteed that I studied the numbers. Looking at the numbers and comparing them with those in previous years helped me see trends—too little inventory often resulted in poor sales; too much inventory sometimes depleted my cash and low margin impacted my GMROI. I added notes about special purchases, news that affected the business climate and promotions. Like my personal logs, these business journals were my most critical tools. It helped me manage cash and inventory, plan my marketing and guide my growth in much the same way that I can see that I have trouble making the effort to work out when I travel a great deal. I'm certainly no Luddite and I'm as addicted to technology as most are. But I sometimes think the dealers I consult with have too much data and not enough valuable information. If you have to sift through a 200-page sales or inventory report to make a buying decision my gut tells me you're going to fly by the seat of your pants and try to make your best guess. Streamlined, accurate, timely records are much more helpful. Step back and look at your business and your decision-making strategies to determine what stats you really need to more effectively manage your business. Less may be more if you have the right stuff when you need it. So now that I've met my Retail Observer deadline, it's time to get on my treadmill. And about that extra ten pounds….. BY THE NUM BERS Elly Valas is the Marketing Services Director for Nationwide Marketing Group. She can be reached at elly@ellyvalas.com or at 303-316-7569. Visit her website at www.ellyvalas.com.

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