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| September 2000
Managing: Your Money Your Financials - How Do They Compare? Knowing how your numbers stack up and what they mean will allow you to continue to grow your business Every month without fail, you get those darn numbers from your accountant or bookkeeper. Should you pay attention to them? What do they really mean in the overall scheme of things? Put them to good use by doing some comparisons of your business and other retail businesses. Are your numbers higher or lower than average or the same? If they differ from the average, it doesn’t necessarily indicate a problem, only that you should consider them more closely and understand how and why they differ. Many factors are involved, and there can be many excellent reasons you aren’t in the survey’s norm. The percentages in this article are taken from Jewelers of America’s “1999 Cost of Doing Business Survey.” By the time you read this, the 2000 edition will be available with even more updated information. Now let’s look at a few different numbers. Deciphering a Few Key Statistics Gross Margin, 48% (net sales less cost of goods sold) Comparing this number to Jewelers of America’s industry average will give you an idea how your business is doing on a nationwide basis and by type of store. If you’re below the JA average, it doesn’t necessarily indicate a problem. For example, you may pay a lot in salaries (if your sales staff has tenure, for instance), or a number of other factors may affect your financial reports. However, if your figures deviate from the industry average, it’s important for you to understand why. Payroll, 19.8% (including owners & fringe) Are your costs comparable to those in the survey? Many people assume that if payroll costs are high, as a percentage of sales, they must be overstaffed. However, this may not be the case with your business. First, you should consider all other factors that affect sales, including your store hours, your promotions and your employee scheduling. Look broadly for possible solutions and select actions that make the most sense based on the comparison of numbers and your understanding of your business. You may not need to make any adjustments at all. Advertising and Related Promotional, 3.9% One of the most-asked questions from jewelers nationwide: “How do I rank in comparison to other jewelers in my advertising/promotional spending?” In this category, the midrange low was 2.3% and the high was 5.5% in the 1999 survey. Why the variance? Perhaps because one region has many jewelers who advertise heavily, so everyone has to spend more to keep their store’s name in the public eye. Or perhaps a jeweler runs many promotions to get new customers in the door. If the jeweler is on the low end, maybe the region’s advertising costs are priced well below the national average. This means the jeweler can spend much less on the same amount of advertising as a similar retailer spends in a more-expensive area. Again, know why your numbers fall where they do. Distribution of Sales by Category The chart at left breaks down sales by product category. Your numbers will be different if you promote and sell one particular category over another, such as gemstones, estate jewelry or custom design. While the overall survey’s norm is all fine and good, it may not be the same as your operation. It’s more important to look at categories that compare to your store’s size, location and sales volume to best see how your operation compares. As long as you know why your numbers are what they are, you’re in good shape to continue to grow your business. JA’s “Cost of Doing Business Survey” is a complete 100+ page report. For copies of the 2000 survey, call JA at (800) 223-0673.
– by Caroline Stanley |