Tuesday, July 12, 2011

Why has higher sales become more important than higher profits?

The New Rules of Retail: Competing in the World's Toughest MarketplaceAnswer is easy, bonuses.   When companies give higher and higher bonuses for higher sales,  they forgot you have to make a profit to pay for the bonus.  Many companies have gone out of business all because they forgot the golden rule.  You have to make a profit.   There are people spending too much in expenses just to help them make higher sales and get a bonus.  Problem is the sales aren't always high enough to cover the added costs.

Bonuses should be based on increase in profits and not sales.   There are a lot of badly run businesses out there that could increase their profits while actually decreasing their sales.

Control expenses and you control your business.  Payroll is one of the biggest expenses any business can have.  A lot of managers cut payroll first because it is the easiest thing to do.  Cutting payroll gives you big cuts fast.  It also can ruin a store.  No employees no sales.  

I suggest before you cut payroll you take a good look at how your spending it..   Do you have the right ratio of sales to man hour.  Do you have the man hours evenly scheduled.  Or do you have more sales associates on on busy times and less when its slow.   Are people standing around with nothing to do?

You need to Question your business all the time.  Plan Plan and Plan some more. 
Fail to plan and your just planning to fail.

Are your managers following up on their associates.  Are they out on the sales floor or in the office?  Do you know what people are doing or are you just waisting payroll?  Do department managers spend more time in meetings than they do making sure the job gets done?  

In a Retail store Money is made on the sales floor, not on the phone or in the office.  Not at meetings and not at the home office.  It happens in your store on the sales floor with customer service. The bottom line is if your cutting payroll you better know which employee hours are expendable and which aren't. 

On Saturday afternoon you don't need a bookkeeper doing sales reports that can wait to Monday.  You need all hands on deck helping customers. 

Have you ever gone into a supermarket and couldn't find anyone to help you after 5pm except a cashier?  Imagine if you did?  what if someone was there to help you find your favorite items.   I imagine more sales.

Think like a Customer and you will know how your Customers think!

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