Running a cookshop, like most retail businesses, means that it’s all systems go over the Christmas period.
Now that the Christmas rush has become something of a memory, though, it’s an ideal time to take stock of your business. How did you perform? Did things run like clockwork, or were things starting to creak at the seams? Now is a great time to conduct a performance review, a kind of MOT, while the busy period is still fresh in your mind.
Here are a few suggestions to set you off:
1 Review the equipment you use
Is your equipment performing as it should? Is it making things easier or causing you a bottleneck in the shop? Are you using your IT systems to optimise your business? Maybe you could be using email more often to place orders with suppliers: this can save you time and effort. Does your EPOS system allow you to work out profit margins on individual profits, both online and offline?
2 How are your profit margins?
Now the dust has settled, how about those profit margins? You were probably rushing round like mad at Christmas to get out those online orders. Did you sell plenty of premium brand cook’s knives and kitchen electricals? If so, they must have been competitively priced. It’s great to have increasing sales, but when you take a look at your margins you may be disappointed. After all that effort your net margin (especially after online advertising costs) may disappoint you. This may mean that you will want to look at putting more of your resources into higher-margin products. Remember though, that good marketing is getting the balance between higher and lower margin products just right.
3 Try to improve your cash flow
Look at all your inputs and outputs to identify any areas that could be improved. For example, are you taking advantage of the best rate on payment systems? CHA and trade organisations like them offer good discounts on standard rates to members; you should be capitalising on that. Are you paying your suppliers too promptly? I’m not advocating late payment here, which is a curse and ultimately self-defeating. I’m advocating talking more often to your suppliers about how you pay them; can they offer more flexibility to you? Are you using your bank effectively? All that revenue coming in during late November and December – don’t just let it sit in your current bank account doing nothing. Arrange, in advance, a higher interest savings account to take this extra cash until you need it for payments. Even if it’s only there for a few weeks, the extra interest is all cash on your bottom line.
4 Look at your supplier relationships
This is an area that’s often neglected. You may have been buying cookware from a supplier for years, but when was the last time you talked to them seriously about your terms of business? Most retailers can be incredibly lax in this area. You’re getting good service and the products are selling well. That’s great, but could you be getting better payment terms or an improved margin? If you’re on the same discount structure now as you were three years ago, take a hard look. For a start, you’re probably selling more of their product – so you deserve a better deal from them! Ask and bargain – if you don’t ask you don’t get. Remember, it’s not all about margin, though. Maybe you can negotiate some exclusivity on promotional offers or obtain special display material. Above all talk to them – often!
5 What were the winners and losers?
Reviewing your sales will identify what’s hot and what’s not. If a product line is underperforming then interrogate it. Do you still need to carry it? Is there a better and improved alternative? Product design in the cookware sector is improving and changing at an accelerating rate. Are there new product areas in which you’re not participating? Should you add them to your range? The New Year is the time for the spring fairs, so keep a “hole” of a certain size in your product range and inventory budget for contingency items. When you spot that new and exciting product, then you have the space (and hopefully the cash) to go for it.
This process of business review should not happen only at this time of the year. Ideally, it’s a process that happens on a continual basis. With tight budgets and constraints on customers’ spend, you just can’t afford to cut slack in your system. Things are tight, and you have to run your business accordingly.