Business Memo-- Are you a 'For Profit?'
Learn more about profitability, the internat and ideas for smaller retailers
Randy Eller -- Home Accents Today, 2/5/2007 12:45:00 PM
Watch this space every month for Business Memo. Our three experts will present ideas and examples to help you be more successful in operating your own business. Business Memo is a monthly guest column focused on three major issues our readers always keep at the forefront of their thinking. Randy Eller, a business consultant and former president of CBK, begins the series talking about profitability and the importance of keeping your eye on the profit ball. Internet guru Suze Bragg will help readers get maximum benefit from the Web, while retailer Lynni Megginson, owner of L&M Designs in Potomac, Md., will write about ideas and challenges for small retailers.
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Randy Eller |
You must be certain your business model is a profitable plan. Here’s how I believe you do that, whether you are a retailer, a manufacturer or a sales representative. Raise your customer’s expectations, and your prices and margins can follow. We expect the lowest prices at Wal-Mart because they constantly tell us that’s what we’ll get. Conversely, we expect, and are willing, to pay top dollar at Nordstrom’s. Why? They told us we would. What are you telling your customers? Are you giving them service, selection, a “shopping experience”? If you are, chances are they will see value and be willing to pay you a higher price for it. The only way we can raise our customers’ expectations is to raise our own performance. As soon as you do that, you can raise your prices (margins) and your customers will gladly accept it. Every sale should make a profit of some kind — no excuses! I have heard so many “reasons” from businesses why it is okay to sell this customer below cost, or to take a shorter mark at retail. All of these “reasons” were to gain “market share.” The world is full of bankrupt companies that gained market share by being unprofitable. This does not mean you have to sell every item at maximum profit. One of the smartest things any company can do is sell obsolete items quickly. Every day you keep a bad item on your shelves, it is worth less. Selling it quickly and turning the trash into cash is a profitable thing to do. It allows you to invest new-found cash in better selling products. Sales should always grow faster than costs. This is a simple statement that speaks volumes. This is not easily accomplished, but if you are about to spend money that will put you in an uncomfortable position, be certain the expenditure has a direct path to revenue. Otherwise, you are just adding overhead. Business is never simple. Success is hard. That’s why so many businesses fail. Don’t be obsessed with sales growth, be obsessed with profit. That’s the only thing your employees, family, bankers, and everyone else in your life will care about. Nobody remembers businesses that flame out with fast-growing sales. We remember the ones that produce earnings consistently. Focus. Believe. Be disciplined. Succeed!
*Randy Eller, a 30-year veteran of the industry as a retailer, sales representative, and former partner and president of CBK, is president of Eller Enterprises, a consulting firm. He also is a professional speaker. He can be contacted by e-mail at reller@ellerent.com
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