Solomon Bruce Consulting Blog

Wednesday, January 19, 2011

Sales were up 5%, profits were down-- what happened?

  I was talking to the owner of a  hardware store the other day while I was looking for a couple of items.  I asked how business was and he told me that Sales were up, profits were down!  I said what happened?  He said we got lazy.
   Um, lazy-- I had to know more.  I suspected that he experienced a labor cost issue and that is exactly what it turned out to be.  The store owner said that he paid too much overtime due to improper staff scheduling.  Now, that is interesting.  I was in a restaurant the other day and the executive chef was out working the floor, delivering orders and taking money.  Somebody asked him why he was not cooking and he said that it was his day off, business had been slow and they let the dishwasher and 2 waitresses go home.  The restaurant got real busy and he was called in to help man the store!!
   The hardware store owner said that the key that they failed to do was pay attention to detail!  In many previous posts, we have talked about attention to detail and how the little things can certainly make the big things get bigger.  In this case, not recognizing when additional staff was needed, or not sending extra staff home when the store was slow caused profits to decrease in a year when sales increased by 5%.
    Staffing in a small retail establishment is a tricky business-- however, having increased sales and decreased profits is even a trickier business.  Let's explore how this matter might be handled such that the sales increase and the profits correspondingly increase!
    You probably have a staffing model that has served you well if you have been in business for any time at all.  However, adjustments need to be made, both up and down, if indeed profits are to be increased.  Perhaps the initial model that you are using needs to be changed due to an increase in business.  If more customers are in the store and customer service is the key to small owner/operated businesses, then you will need to have staff available to service those new customers.  Conversely, if you have additional staff on the floor and there are no customers or decreased customer traffic count, then you need to correspondingly reduce staff in order to maintain profit levels.
    Data is the key here.  We have tools that we use with clients that help identify trends in customer flow that may be valuable if indeed you are experiencing such a challenge.  Using up to date and current data is important for making these types of decisions.  Perhaps a call to our firm may be of benefit to you.  After all, what are you in business to do-- make and retain green dollar bills!


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