The numbers game
Properly used data can be a powerful management tool.
I’ve always been a numbers kind of guy!
I liked math when I was in school and learned very early on how powerful numbers can be in helping run a business. The more ways you can analyze your business, the more successful your business will be.
STOP! Don’t move onto the next article just because numbers aren’t your thing. At least give me an opportunity to explain why I strongly believe you should incorporate numbers into the management of your showroom.
STOP! If you’re a showroom sales consultant and are thinking that numbers only apply to managers, you’re wrong. Numbers should be important to the big bosses and all the folks in the trenches as well.
Numbers can be fun if used in the right way. You can use them to set goals, as guidelines and as incentives to make more money. I thought that might get your attention.
Most importantly, you can use numbers to operate a more efficient, profitable showroom business.
I’ve had the pleasure of working with many of you and have discovered firsthand the majority of you do not use enough numbers as tools to help you manage the showroom side of your business. It’s hard to believe, but some of you still don’t separate showroom sales from wholesale sales. Plus, you don’t track gross profit margins or expenses on the showroom business. These numbers end up being all bulked together as one big company number. Hello? How in the world will you ever know if the large investment you’ve made in the showroom is giving you a good return on that investment?
Here are the areas I strongly encourage you start putting numbers to good use in. Each one of these is a powerful management tool. By using them you will be amazed at how much easier it will be in analyzing your showroom business and making important business decisions.
Monthly showroom P & L statement: Use this information to determine if the showroom is making or losing money and how much. Treat the showroom as a profit center.
Monthly showroom sales: Break these numbers out by individual sales consultants.
Monthly showroom expenses: Break expenses out into as many categories as possible. This makes it much easier to digest, analyze and make good business decisions.
Monthly showroom bottom line: Are you making or losing money? Are you realizing a good return on your investment? This number will tell you whether you should be in the showroom business.
Sales per sq.-ft. of display space: Divide the total annual sales by the total square footage of display space. Do not include office, warehouse space, etc. This number varies dramatically by the type of business you are operating. By far, Apple is the leader at $6,000 per sq. ft. Tiffany is a distant second at $3,000. Others you might be familiar with are Costco at $1,000, Best Buy at $800, Walmart at $487, Lowes and Home Depot about $300 each, Kmart and Sears at $110 each. This shows higher-end luxury products garner the highest sales per sq.-ft. I can tell you from personal experience and working with some very well-run showrooms that a good number for our industry should be in the $500-$750 per sq.-ft. range. Anything over this is terrific. Less means you should be making some changes. Obviously, the total amount of showroom sales and the size of your display space will dictate what your number will be.
Inventory turn rate: This is not as significant a number for showrooms as it is for the wholesale side of your business since about 70% (+/-) of all showroom sales are special order. But it’s still a good number to know.
Quotation close ratio: What percent of your quotes turn into orders? If it’s less than 80%, you may be doing something wrong. If you don’t track this important number you’ll never know if you need to improve it. Selling skills significantly impact this number.
Monthly operating budget: This will be your roadmap for operating the showroom on a month-to-month basis.
Monthly/annual marketing budget: I strongly recommend you invest 3 to 5% of showroom sales to an annual marketing program.
Sales per consultant: This number varies tremendously. I’ve seen ranges from as low as $20,000 per month to as high as $150,000 per month. This is a huge difference. I believe an average of $75,000 per month would be a good goal. Obviously this number will vary depending upon your product and client mix. This number tracks each person’s individual productivity and should also weigh heavy into how much a sales consultant should be paid.
Gross profit and dollars per consultant: Just like sales this number also widely varies. I’ve seen margins as low as 22% and as high as 45%. I believe your goal should be in the 33 to 38% range. Once again, this will vary depending on your product and customer mix.
Number of line items per invoice: The more lines per invoice and the higher the dollar value, the more profitable you will be.
Average sale per invoice: The bigger the invoice value, the better this number is.
Average gross profit % and dollars per invoice: High GP is the goal!
Sales and margin by vendor partners: Who are your most- and least-profitable vendor partners? When you identify the low ones, you can either work for improvement or make them go away. Likewise this will tell you who your most profitable vendor partners are, which then allows you to concentrate on displaying and selling their products.
Sales/turn rate of display products: By tracking this rate you will know which display items are selling and which ones are not. The obvious result of this exercise is that you want the fastest-moving products on display. Remember, you do need a couple of “wow” displays and these may not be real fast-movers.
Product group sales: By breaking out sales by category (faucets, tubs, lavs, accessories, door and cabinet hardware, etc.), you will be able to factually identify where you should concentrate and improve your sales efforts.
RGA/mistakes made by sales consultants: These are expensive, hinder customer service and need to be controlled. This will identify which salespeople need to improve in this area.
Special order vs. stock order: By tracking repeat special orders you will be able to make the decision to add those products to your stock inventory. This will improve customer service and save money on special orders.
Prospects in the showroom: Track this on a daily, weekly and monthly basis. This number will tell you when your marketing activities are working and when they are not.
Prospect/purchase ratio: If you have a high number of “lookers” that ultimately don’t purchase, you need to figure out why and how to correct it.
Sales by customer category: We’re talking plumber, builder, remodeler, homeowner, designer, architects, etc. Knowing this number will tell you which marketing efforts are working and which ones might not be. Your profitability should be higher on homeowners, so growing sales in this segment is important.
Sales/profits from specific marketing efforts: This is a tough number to tie down, but if you are investing money in marketing specific products and services you should be able to see a change in sales on that product/service.
Spiffs on specific products and vendors: Generally, these are used to push a specific product or vendor for a specific period of time (30 to 90 days). Tracking the results will tell you how successful the effort was.
New clients for a specific period of time: This certainly should be an ongoing effort and tracking the results of your efforts will tell you what’s working and what’s not from a marketing and sales point of view. Here I am referring mainly to repeat type of customers.
Embrace the digital
The digital age has opened up several opportunities to put numbers to work for you. Here are some examples.
Web traffic: How many “hits” do you get daily, weekly, monthly? Tracking this can help you identify spikes in traffic and pinpoint the cause so you can focus on what works.
Page rank: You’re likely spending time and money improving your website,
adding content and sending Web traffic to your page. But, do you know how well your page ranks compared to your competitors and other websites out there? Alexa.com allows you to track how popular your site is on a month-by-month basis.
Social media engagement: Most of you may be looking at the number of followers you have, but are you tracking their engagement? How many times are your posts read, commented on and shared? How many replies are you getting? Followers who don’t engage aren’t helping you grow your brand.
Conversations: Track through the entire customer lifecycle by measuring how many website visitors turn into subscribers and then again how many subscribers become clients.
With today’s computer software it’s easier than ever to start putting numbers to work for you. Start by building a base and then over time compare your numbers on a monthly and yearly basis.
This is the beginning of a new year. There is no better time to make a commitment to start using numbers. I strongly believe doing this will help make you the best you can be.