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See benchmarks - and five year trend charts! - for the six key ratios every retailer must monitor. See how your store compares.
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Opening a store?
Adding stores?
RetailStartup.com
Opening a store?
Adding stores?
RetailStartup.com
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R-E-S-P-E-C-T
I'm tired of my banker - or my accountant! - intimidating me.
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Start now! Just $24.95/month
Total Access: Members-Only Collection
M2M |
On-demand, 24/7, whenever you need it.
All for just $24.95 per month.
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The Top Five Killers of Retail Businesses
(And guess what did NOT make the list?!)
Last year, every 12 minutes, a retail business in the U. S. failed. Over 5 failures per hour, every hour, every day, 24/7/365.
What caused these failures?
#5. Out-of-control growth
#4. Out-of-control expenses
#3. Failure to manage Gross Margin
#2. Out-of-control inventory
#1. Being out of cash
Notice what's missing from this list? Not one mention of the "top line" - sales!
If there is any good news in this list, it is that the most damaging forces for retail businesses are in fact "controllable variables". Owners CAN control expansions and growth, expenses, inventory, and yes, even margins...all of which affect the availability of cash.
That's not to say these are easy choices; many are very anguishing. But especially in this economic climate, the most uncontrollable variable of all is the customer.
As Owner, keep focusing your resources, energy, and efforts on those parts of your business you can control. Happily, those are the ones that are most likely to enable you to survive!
The Top Five Killers of Retail Businesses
(And guess what did NOT make the list?!)
Last year, every 12 minutes, a retail business in the U. S. failed. Over 5 failures per hour, every hour, every day, 24/7/365.
What caused these failures?
#5. Out-of-control growth
#4. Out-of-control expenses
#3. Failure to manage Gross Margin
#2. Out-of-control inventory
#1. Being out of cash
Notice what's missing from this list? Not one mention of the "top line" - sales!
If there is any good news in this list, it is that the most damaging forces for retail businesses are in fact "controllable variables". Owners CAN control expansions and growth, expenses, inventory, and yes, even margins...all of which affect the availability of cash.
That's not to say these are easy choices; many are very anguishing. But especially in this economic climate, the most uncontrollable variable of all is the customer.
As Owner, keep focusing your resources, energy, and efforts on those parts of your business you can control. Happily, those are the ones that are most likely to enable you to survive!
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| How-To Articles for Retailers from The ROI
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| The Myth of "the Bottom Line"Retail business owners are conditioned from day one to have a profit and improve their bottom line. Yet, sadly, most owners aren’t sure exactly why. What is profit, where does it go, and why is it important? These are questions that we shouldn’t have myths about! read more ... |
| Retailers: How To Read Your Financial Statement for Fun and Profit!What did your last financial statement indicate to you about your business? If you say “It told me that we made a profit,” or “It’s just a year-end summary,” you would be wise to keep reading. While a financial statement does provide that information, it is really much more. It provides vital clues to what’s right and wrong about your store. You don’t have to be a CPA to read one, just familiar with the basic accounting terms and what they mean to your business. read more ... |
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| The Myth of "the Bottom Line"Retail business owners are conditioned from day one to have a profit and improve their bottom line. Yet, sadly, most owners aren’t sure exactly why. What is profit, where does it go, and why is it important? These are questions that we shouldn’t have myths about! read more ... |
| Retailers: How To Read Your Financial Statement for Fun and Profit!What did your last financial statement indicate to you about your business? If you say “It told me that we made a profit,” or “It’s just a year-end summary,” you would be wise to keep reading. While a financial statement does provide that information, it is really much more. It provides vital clues to what’s right and wrong about your store. You don’t have to be a CPA to read one, just familiar with the basic accounting terms and what they mean to your business. read more ... |
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The Members-Only Collection
The Members-Only Collection
| Managing Working Capital in a Retail Business Owning a retail business is a little like riding a bike—there are going to be strenuous uphills, glorious downhills and demanding stretches in between. How you handle the ride is based on your ability to keep the wheels moving by combining judicious pedaling with knowing when to shift gears quickly and skillfully.
Imagine your retail business consists of two large wheels, much like a bicycle. As a retailer, the bicycle you ride is called the working capital cycle. Its two wheels are called the sales wheel and the working capital wheel. read more ... |
| K.I.S.S.?? Only If It's Not Too Costly A Comparison of the Cost Method vs. the Retail Method of Accounting for Inventory
K.I.S.S. – Keep It Simple, Stupid – may aptly describe the manner by which many retailers calculate their all-important Gross Profit. For some, it works just fine. For others, "keeping it simple" can be disastrous.
If you are using the Cost Method of accounting, you are using the more common method of inventory valuation. It is easy to understand and requires only simple records and management of a good point-of-sale inventory system. It’s the K.I.S.S. method...but may be the kiss of death! The Retail Method is more complex and requires more bookkeeping, but can be superior for controlling the Cost of Goods Sold. read more ... |
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| Managing Working Capital in a Retail Business Owning a retail business is a little like riding a bike—there are going to be strenuous uphills, glorious downhills and demanding stretches in between. How you handle the ride is based on your ability to keep the wheels moving by combining judicious pedaling with knowing when to shift gears quickly and skillfully.
Imagine your retail business consists of two large wheels, much like a bicycle. As a retailer, the bicycle you ride is called the working capital cycle. Its two wheels are called the sales wheel and the working capital wheel. read more ... |
| K.I.S.S.?? Only If It's Not Too Costly A Comparison of the Cost Method vs. the Retail Method of Accounting for Inventory
K.I.S.S. – Keep It Simple, Stupid – may aptly describe the manner by which many retailers calculate their all-important Gross Profit. For some, it works just fine. For others, "keeping it simple" can be disastrous.
If you are using the Cost Method of accounting, you are using the more common method of inventory valuation. It is easy to understand and requires only simple records and management of a good point-of-sale inventory system. It’s the K.I.S.S. method...but may be the kiss of death! The Retail Method is more complex and requires more bookkeeping, but can be superior for controlling the Cost of Goods Sold. read more ... |
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| MORE Tools & Resources in the Members-Only Collection
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Now. Learn Basic Retail Finance. At your own pace. 24/7.
Profits & Debt Management - Financial Statements - P&L's - Balance Sheets - Inventory Management (@Cost or @Retail) - Turnover - Buying Plan Budgets - GMROI - Cash Flow - pro formas - Ratio Analysis -
Integrated Retail Financial Plans
The ROI's Online Seminar on Retail Finance Basics is an interactive, self-paced course. By retailers, for retailers. "All it takes is a little desire."
- Learn how the income statement and balance sheet must work together.
- Learn how to do inventory buying plans (Open-to-Buys) at either cost or retail.
- Learn how to do a retail cash flow, one that reflects your buying plan.
Includes interactive content, self-quizzes, printable worksheets, extra how-to articles by retail experts, and a special case study featuring Helen and Irving Surviving of The I. M. Surviving(?!) Company.
Take a Feature Tour 
Feature Tour opens in a separate, pop-up window. Please disable pop-up blockers.
No retailer really wants to pay for bookkeeping or accounting. But it's necessary for two reasons: (1) to accurately satisfy the I.R.S.; (2) to accurately show where the business has been and where it is now.
This second reason is essential for what REALLY matters: doing better in the future!
The ROI has developed The Screening Test for Retail Bookkeepers. As an ROI Member you may download a free copy of that test to use as you interview prospective bookkeepers.
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"May I take you to lunch?"
If word gets out that your Debt-to-Worth ratio is below 1:1, like 0.7:1, bankers gladly will pay for you to have a fancy lunch. Similarly, if your Debt-to-Worth ratio is near 1:1, he/she will still pay for your lunch...but a more modest one.
However, if your D/W ratio is above 1:1, like at 3:1, you should expect to pay for the lunch. Higher than 3:1? Maybe they'll sit long enough for a soda, but don't count on it.
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Retail Owners...
Need a New Strategy?
Customized • Timely • Objective
(more info...)
Retail Owners...
Need a New Strategy?
Customized • Timely • Objective
(more info...)
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