The Best-Laid Plans of Mice
and Men: Setting Goals for the
Year 2007

– Don Capman, President,
   J.D. Associates

By now, most of us have probably given up on our New Year’s resolutions. I can hear it now:

“I need to get out and exercise more but my one pair of jogging shorts has a hole in them.”
 
“I am going to read more but my dog ran off with my glasses.” 

“I am going to go on a diet as soon as the new Chinese restaurant in my neighborhood raises its prices.” 

“I am going to spend more time with my family, but they really stress me out”.

“I want to increase my business by 15% this year, but I don’t have a clue how to accomplish that.” 

Why do resolutions most often fail?

• They may be unrealistic to begin with. Setting the bar too high will only set you up to fail. Who wants to fail?
• The motivation and commitment to change may not be there. If there is no commitment to change, why bother?
• External support from family and/or friends may be lacking. Sometimes a little encouragement can go a long way. Success may take a team effort.
• The goal may seem clear but there might not be a plan to help you to achieve that goal. Goals are generally easy to define. Plans which are broken out into logical and manageable steps are much more difficult.

One of the biggest questions that we, as retailers, seem to have at the beginning of the New Year, after the ‘dust has settled’, is “how can my store be more profitable?”  Many of us answer that question by making a resolution and setting a goal. For example, we may say that we want to increase our profitability this year by 15% over last year. Now, that may be a perfectly legitimate goal but how did we arrive at that percentage and how are we going to reach that goal? 

Goals in any business are essential and usually never “right on the money” unless you have a clear cut deadline to meet with IRS.  Goals are usually dynamic, moving targets. So if that’s the case, why should you set goals for your business?  Goals help you to come up with a plan.  Plans include steps that you can take to help you achieve your ultimate goal. Without steps, you are leaving everything to chance. Take the example of increasing profitability by 15%. Now, try to attach a plan of action to that goal.  Break the plan down into manageable and measurable steps. Let’s elaborate for a minute on what those steps might be:

• Analyze last year’s sales and take a hard look at your least and most profitable departments. (Your Point of Sale System should easily give you this information in a report). If you were to reduce inventory in the unprofitable departments and increase inventory in the profitable departments, would that help you achieve your 15% increase?
• Analyze vendor productivity. Although you might like your rep, is their line moving at a healthy profit and a better than average turn? Don’t be afraid to thin out the vendor playing field. Generally, we have too many anyway. Concentrate on vendors that give you WOW merchandise at winning price points.
• Analyze the productivity of your employees. Do you have too many laggards or do some of your employees just need more training? If you fired the slugs and trained the “stars”, would that help you to achieve your 15% increase? (Again, your POS System should easily give you this information).
• Track the traffic in your store(s) and measure the conversion rate (the percentage of the potential customers coming through the door who actually purchase something). If you could increase the conversion rate by a small percentage, would that make a difference?
•  Analyze your inventory shrinkage regularly and install safeguards such as cameras linked to POS to monitor suspicious activities. Keep in mind that just under 50% of inventory shrinkage comes from employee theft. If you were to reduce your shrinkage by even 1%, would that help you achieve your 15% increase?
• Measure the effectiveness of your advertising. Are you spending big bucks on print ads or mailings that produce no return on investment? Most POS systems can track an ad campaign. You wouldn’t believe how ineffective most media advertising is to specialty retailers. If you could cut out some of those unproductive advertising dollars, they become profit!
• Implement a customer loyalty program. If it’s done right, your customers will continue to be customers, and you won’t have to spend huge amounts of money always recruiting new customers. It seems that would help you achieve that 15% goal. Most POS systems have affordable add-on modules for customer loyalty.
• Add an OPEN TO BUY tool to your POS solution arsenal. Open To Buy tools help you plan your purchases with relative accuracy and can be adjusted to address unanticipated trends. Open To Buy tools come in all different sizes, prices, and shapes depending on the level of sophistication desired.
• Measure your success every month. Don’t wait until the end of the year to find out if you are ‘on track’.  As I said previously, goals are dynamic and steps can be modified much more easily in the short term to meet changing conditions.

These are just some of the steps you can take to help you achieve your goal. I realize that implementing all of these steps at once is near impossible, but PUTTING TOGETHER A PLAN is the first step and is manageable. The old saying that “Resolutions are made to be broken” might be OK for the Chinese food addict, but it is not OK and can be lethal to a retail business. Should you wish to discuss this concept further, feel free to email or call me, and we can toss around some ideas.