This is an important retail distinction that your ePoS system should handle properly. A markdown is a devaluation of a product based upon its inability to be sold at the original planned selling price. A discount is a reduction in the price of an item or transaction based upon the customer making the purchase. Examples of this would be employee, senior, and frequent-buyer discounts. Read the rest of this entry »
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OTB (Open-to-Buy, not Off Track Betting)
As I wrote earlier, setting prices can have a short-term impact on improving retail health. However, there is another important aspect that can lead to long term improvement of your retail shop. Open-to-Buy is what is needed. If you have knowledge of spreadsheet capabilities for adding and averaging, this should be a breeze.
Simply stated, an OTB is a three-step budgeting process for setting inventory levels, typically by department/class and by month. The first step is developing a sales plan (at retail) by month. Step two is determining inventory levels needed to meet each of those sales goals. Step three, the actual OTB, is the amount of new inventory needed to get to the next month’s planned inventory level. So steps 1 and 3 are “relatively” simple. Read the rest of this entry »
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If you are like most golf retailers, you probably need to review some basics tenets of accounting to understand accounting’s impact on some of our decisions. Specifically, we will address the Profit and Loss Statement. Rather than think about dollars on the P&L, focus on the percentages.
The first sermon relates to how we read the Profit & Loss statement. On the P&L, the top of the report shows Revenue or Income. All percentages are calculated as a percentage of this number. Therefore, Revenue is always 100% (100% of itself). The next line is Cost of Goods Sold (COGS). It represents the money that you paid for the items that were sold. COGS is also represented as a percentage of sales. This example excludes green fees and cart fees as if you were a retailer.
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PROFIT & Loss statement
April 1 – September 30 |
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Total Sales
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$ 150,000
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100.0%
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Cost of Goods Sold
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$ 96,700
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64.5%
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Gross Profits
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$ 53,300
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35.5%
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So for this 6-month period (theoretically-since this is not cash flow), we have earned $53,300 to spend on all of our operating expenses. In order for us to be profitable, the sum total of our operating expenses cannot be more than $53,3o0 or 35.5% of sales.
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When the only tool you have is a hammer, every problem begins to look like a nail.
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Denial is more than a river in Egypt.
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I can certainly think of a lot of snide remarks about this one!
We’ re losing money, but we make up for it in volume.
First, let’s define what a Mill River Plan is. In some private clubs, members fork over $100 to be able to purchase merchandise at cost plus 10%. According to my math, that means a 9.1% attained margin. However, on the first day of the season, you have $40,000 from the initial fee from 400 members. This is the best day of the year and my suggestion is to take off for Maui (Kapalua is my favorite place–see Gary Planos) OR buy a lot of lottery tickets.
Now that you are back or are finished scratching the lotto tickets, let’s look at what is in store for you for the rest of the year. It won’t be pretty.
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After high school, I decided I didn’t need any more formal education. So I went to the University of Tennessee.
Tennessee is a drinking school with a football problem.
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Whenever I work with a new client, they usually lack profits and have excessive inventory. The excessive inventory is a longer project, usually taking six months to one year to get on track. That step involves the establishment of a sales plan and an Open-to-Buy plan.
However, there is a quick fix that can have a fantastic impact for a golf shop. That involves establishing a pricing model.
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Just about the time they make something fool-proof, someone makes a better fool.
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Remember our two merchandise buyers from last month? One held out for higher profits and the other unloaded and reloaded. Another major benefit of the second approach was that there was fresh merchandise coming in to the shop throughout the year and it attracted potential customers to come in to see the new inventory. The other shop had the same stale merchandise and people stopped looking.
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