Increasing sales is only one way. Here are nine others.
The topic for this month (but, really, it can be the topic for any month) is increasing profitability. When we ask furniture retailers for their input, we will most likely hear two traditional suggestions: Increase sales and increase margins.
That’s certainly true, but those are also two of the hardest ways for retailers to increase their companies’ profits. I mean, honestly, if it were that easy, we’d all be retired by now. Right? Instead, let’s look at nine other possible ways you can increase the profitability of your business.
Examine your employee schedule
After inventory, wages are the largest expense your furniture store incurs. If you have the data to review your sales history, you should see a pattern by day and month indicating when you need your sales help most. Chances are you don’t need as much staffing on a Tuesday morning as you do on a Saturday afternoon. Have you compared your showroom staffing to the days and hours when traffic flow is highest?
While you look at payroll, ask your workers compensation insurance sales rep to help you review how you have categorized your employees. You may find you have employees in higher-risk categories than necessary. In fact, while you are chatting with your insurance rep, you should probably have him review your entire policy. When’s the last time you did that? Insurance policy reviews are like physical check-ups. They can be a pain to go through, but they’re important to our futures.
You should put your insurance coverage out for bid at least biannually to make sure the price you are paying is in line. As you visit with prospective agents, ask them where you can save money. Many policies allow seasonal fluctuations of up to 25 percent. If this is the case for yours, you can consider calculating your highest inventory level, subtract 25 percent, and buy inventory coverage for this amount. If your business is renting space, make sure you are not buying coverage for something that the landlord owns.
If you consider advertising a necessary expense rather than a method of drawing customers, you are probably wasting money.
Your advertising should be calculated as a percentage of monthly or annual sales. Of this figure, you should set aside approximately 10 percent for last-minute opportunities and advertising expenses that are over budget.
You will often get a better rate by making an annual commitment rather than simply buying advertising time or space when the sales rep calls on you. Now, where your advertising budget should be spent is a whole different column.
Review your utilities expenses
April is a transitional month from cold to warm in some parts of the country. Your cooling and heating systems have filters, which should be checked each month and, if necessary, replaced. These systems should have at least an annual checkup to make sure they are operating at peak efficiency. Check your water usage by making sure all faucets and toilets are functioning properly. In many communities, your sewer disposal rate is tied to water usage, so if you are wasteful with water, you are paying twice.
Check with your garbage disposal company, too. Many Home Furnishings Association members are reaping big savings by deciding to recycle the large amounts of cardboard and paper they use. You get a lot of cardboard and packing foam after every shipment. If you’re just throwing it out, you could be throwing away money.
Leverage your bank
If all you do with your bank is deposit funds and write checks, you should consider doing business where it will cost less. One retailer I know reported saving more than $100 each month by changing banks after he took copies of his recent statements to other banks and asked what its fees would be. When it comes to buying furniture, shoppers don’t hesitate to compare prices. Take a cue from your shoppers.
This is often a catch-all for miscellaneous business expenses. However, an annual review of what you categorize as outside services is a mandatory step in controlling expenses.
You may also find that certain tasks, such as payroll, could be done better or less expensively when you let an outside service handle the job. Sure, you or an employee may do it now, but that time and expertise perhaps could be spent more productively.
Accounting and legal
I’m grouping these two expenses together. While I hope you have little legal expense, the accounting service is always a place to look for savings. Review what your accountant does each month for the fee you pay and ask other retailers what they spend.
Too often a retailer pays an accountant several hundred dollars each month for a financial statement that the retailer doesn’t fully understand or find useful in making decisions. Your accountant should not just be minding your numbers. She should offer suggestions on how and where to save money. If she’s not, it may be time to for you to find a replacement.
The first place to examine is paper products and forms. Anyone who has ever ordered a printed form has found that the difference in price between 1,000 and 5,000 copies is minimal. The expense-watching business will calculate the number of forms used in a year and order quantities that will reduce the frequency of ordering and save valuable dollars.
Repairs and maintenance
If something breaks, you fix it. However, many companies offer service contracts that can work to your advantage. You may be able to negotiate a maintenance contract for your heating and cooling system, delivery vehicles, computers and other equipment. On the other hand, if a piece of equipment rarely has a problem, you may want to cancel a maintenance contract and pay for repairs as needed.
Cutting expenses is not a cure-all for a business. You want to increase sales, improve margins and find savings to maximize your business.
However, as the old adage reminds us, “If you don’t spend it, you don’t have to sell something to cover the expense.”