Specialty Food Magazine is the leading publication for retailers, manufacturers and foodservice professionals in the specialty food trade. It provides news, trends and business-building insights that help readers keep their businesses competitive.
Issue link: https://www.e-digitaleditions.com/i/838473
you may not sell the product before it spoils. You should know the time for spoilage and carrying your inventory." Knowing how quick- ly items turn over can be calculated, and the smaller the number, the better. The goal is determining the magic number for your company. "It depends on whether you have seasonal items or things that go out of favor, but you never want to be out of stock " Burns said. Creating metrics around transport and production time, and ingredients, will help with variance. By creating standards, you can carry your inventory at the appropriate number. Anything other than that number goes into a variance account, so you can see how things change and why. Without standards, you won't know how much it truly costs to be in business. You want it to be as close to zero as possible, Burns said. If it's not, look at things like inventory management, inventory costing, and supplier transparency. 3. Customers. There are three ways to grow revenue: Acquire more customers, have customers buy more often, or have customers spend more. But first you need to know who they are, what they buy, and who are your best ones. Also, you get to decide who you want your customers to be. To measure the average customers' value, calculate how many you have, and the average value for each one. Then target those who are above or below the average line, focusing on below-the-line cus- tomers to increase sales. Also, gather customer satisfaction ratings. While kudos feel good, it's understanding why customers are not satisfied that's most important to analyze. Demographics by product line and geography are valuable as well. You want to know what top customers are buying in each region or channel. "A particular f lavor or size sells well in one region but not another. Understanding their likes will help you produce the right things for the right people," Burns noted. 4. People. In addition to your products, you need committed employees who make them and get them out the door. "People, whether you're a product-driven organization or not, help drive revenue. Having metrics around staffers makes sense," Burns said. Analyzing the activities of your salespeople and comparing them to each other identifies opportunities. You can measure conversion rates, turnaround time for online orders, and the average value of orders per rep to see who is excelling, and who's not. "Employees want to believe in and have a relationship with you. They want to know their work matters," Burns said. Companies with engaged employees outperform others by more than 200 percent. And with $11 billion lost annually to employee turnover, it's clearly much more expensive to find and train than to take an existing employee and get them on track. "You should measure how engaged they are. If not, you could be missing the boat," she added. 5. Logistics. Lost revenue through out-of-stock products, inef- ficient transportation and spoilage, and excessive inventory amount to billions of dollars each year. Burns suggested capturing data about what happens to your product when it leaves your warehouse. Measure the differential and figure out how to make it as small as possible. Find out how it gets from your plant or co-packer to Having metrics around staffers makes sense. Companies with engaged employees outperform others by more than 200 percent. LOOKING AHEAD If your goals include preparing for a capital infusion, these KPIs will be critical for lenders and investors to analyze. Cash Flow: Not only a view of your current state, this metric can give lenders and investors a projected idea of how much cash you will make in the future. Revenue Growth: This denotes your potential and will show how saturated your market is. Diversification of Customer Base: Having one golden-goose customer may sound appealing, but if you sell more than 50 percent of your product to that account, you're a phone call away from bankruptcy if they disappear. EBITDA: If you ever want to sell your company, Earnings Before Interest, Taxes, Depreciation, and Appreciation will be important to prospective buyers. GAAP: Lenders and investors look to Generally Accepted Accounting Principle financial statements for internal controls to ensure you have checks and balances that prevent fraud; leadership team composition and experience; and depth and reliability of infrastructure. Gross Margin: This number is especially important by product line so investors can see where their opportunities lie. specialty food maker 138 ❘ SPECIALTY FOOD MAGAZINE specialtyfood.com