Retail Observer

RETAILOBSERVER.COM SEPTEMBER 2016 34 A s we're hurling toward the end of baseball season, we're reminded of the importance of numbers. Players are judged by their statistics—pitchers by ERA, wins and saves; batters by home run stats, and runs batted in. Even in Denver where our Rockies are well below .500, we can cheer our league-leading home run hitter Trevor Story and Nolan Arenado for runs batted in. I received an almost frantic sounding email this week from a business owner in the Midwest. It read, in part, "desperate for direction.… Don't know where to turn." I told the dealer to send me their latest financial statement and I'd try to help. They promptly forwarded me their year-end financials that they had just received from their accountant—almost seven months after that year had closed. The panic was caused by a local bank, having just received those same statements, calling their loan. The facts were that sales had declined almost 23% since the previous year; gross margin had slipped; inventory had increased over $100,000 and they had a $135,000 swing in their operating profit from a significant gain in 2014 to an even greater loss last year. But the real problem was that they didn't see it coming so they couldn't reach out for help early enough. They spent a good deal of the previous year changing computer systems. During the transition, they didn't generate any kind of reporting. Cash flow indicated that sales were slowing but they didn't know how much. They bought what they needed to fill customer orders— and to keep their vendors assured that they had great floor displays of all those suppliers' products. But they didn't know how much their inventory had grown. They had no clue what their gross margin was. These are great people—hard- working, salt- of -the earth folks who are active in their buying group and have attended countless NARDA management programs with their now retired folks. They just took their eye off the ball and the results may be disastrous. Here are the three major takeaways that I took from reviewing their situation. • Retail is a speed game. In this ever-changing environment, dealers need weekly dashboards and timely, accurate monthly financials. We can't live in the rear-view mirror, but we sure need to know what's whizzing past us so that we can avoid obstacles ahead. The advantage independents have over big box competitors is our ability to turn on a dime. We can see what's happening with our competitors minute by minute and stay in the game. A weekly dashboard can help chart progress toward your monthly sales goals, tweak margin, encourage your sales leaders and coach poor performers. Whether you rely on outside accountant or generate your financials in-house, you need your income statement and balance sheet on the 10th of the month. You'll be able to see quickly if your inventory is in line, your margin is what you expected, and what expenses need to be better managed. • Analyze, dissect, probe, scrutinize, study and question. Getting the numbers isn't enough. Carve out quiet time to see what they mean. Turn off the phone and don't check email. Investing even thirty minutes a month can give you a great handle on where your business is headed. Keep a spreadsheet with key indicators—sales, margin, inventory, GMROI, Current Ratio, Quick Ratio, Cash Ratio, Debt to Net Worth. Enter the numbers on your scoreboard yourself so that you'll be sure to look at more than just your bottom line. Track trends so that you can quickly change your merchandising assortment, do more sales training, lower your inventory, advertise differently or whatever it takes to build on positive trends and stop negative ones early. • Ask for help early. Independent retailers are too often just that— independent. There's no shame in reaching out for ideas and feedback. Develop a cadre of other similar dealers who you trust that you can share successes and concerns with. They need input as much as you do. At the first sign of trouble, reach out to your accountant, your buying group or your finance partners for advice. Find a relief pitcher if you're not winning your game. Sometimes, just sharing your thoughts will help you see your own solutions. As I write this in late July, the Cubs are leading the National League with a 58-38 WL record and the Rockies are leading the Braves 7-0 in the 4th. Great stats for a Sunday afternoon, but not the ones I'd rely on to successfully manage my business. Elly Valas is an author, speaker and retail consultant. She can be reached at elly@ellyvalas.com or 303-316-7568. Elly Valas Retail Views RO KEEP YOUR EYE ON THE BALL

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