©Copyright 1999-2020. The Retail Owners Institute®. All rights reserved.
by Patricia M. Johnson, CMC and Richard F. Outcalt, CMC
What is the most overlooked and under-performed job in retailing today? Being the Owner!
Owners have responsibilities that are separate and distinct from any other job in retailing.
Winston Churchill once said,
“Some are born great. Some achieve greatness. And some have greatness thrust upon them.”
And so it is with business ownership: some are born to it; others achieve it; still others have it thrust upon them.
Whatever their route to retail ownership, few recognize – or appreciate – that being the owner is its own job, separate and distinct from any other job in retailing.
Yet why is it that the Owner is usually the only person in a retail operation without a job description? (And therefore, not subject to a performance review?!)
Whether the “Owner” is one person (perhaps the founder); several people (perhaps family members, business partners, even investors); or, as in the case of a corporation, represented by the Board of Directors, the job of the “Owner” is the most under-performed and overlooked job in retailing today!
Indeed, The ROI believes that failures in retail are traceable not to weak management, nor to weak CEOs. Instead, most retail failures can be traced directly to bad ownership!
The Retail Owners Institute has identified that every retail business – no matter its size – has three levels of management issues, or responsibilities, each with its own unique demands. The Institute has defined these three levels:
Often, these Three Levels of Issues are entangled and overlapping. And, just as often, the word “owner” is used interchangeably with “boss” or “president” or “manager”. This confusion can no longer be tolerated.
It is imperative to separate the Three Levels of Issues so that the Owners can be held accountable to a higher standard of performance. What will it take for Owners to do their job properly? It starts with the recognition of the Three Levels of Issues, and then the focus on the “Owner-Only Responsibilities”.
The number one responsibility of the Owner is the survival of the business. But here’s the key: the Owner must know “Why?”
Why should this business survive? Why are we working so hard? What is the Owner’s vision for the future? Or, put another way, “What constitutes success?”
To be the biggest, the most dominant in the market?
The fastest growing?
To be a way of life for the Owner, a place to go, something to do?
To create personal wealth?
To be a great place for employees to work?
To support a larger cause?
To be readied for sale to someone else?
The answer is decidedly not the same for everyone. And, there is no one “right” answer. Moreover, for each business and its Owner(s), the answer changes over time.
The Owner’s responsibility is to address this question, gain consensus if there are multiple Owners, and then, effectively communicate this answer to “Why survive?” throughout the business. And, until the answer changes (because the Owner’s circumstances have changed), this “answer” is the foundation of all strategic business decisions within the company.
Owner Responsibility #2: Maintaining the Competitive Edge
Next up for Owners: sharpening the competitive edge. Retailers must ask themselves: “If our business disappeared today, would any of our customers really care?” If there is any hesitation at all in the response, it is time to re-invent the competitive edge.
Once again, there is not just one “right” competitive edge that works for every business. Each retailer must first determine what matters the most to their best customers. Then, objectively evaluate whether their business can deliver on those expectations. If not, what will it take to do so?
Owner Responsibility #3: Manage the Balance Sheet
The next major responsibility of the Owner is to manage the Balance Sheet. This involves the Owner’s appetite for risk. Or maybe we should say, the Owner’s stomach - or tolerance - for risk.
What debt-to-worth ratio should be targeted?
How rapidly should assets grow?
How leveraged should the business be?
How liquid does the Owner want the business to be (e.g., targeted Current Ratio and Working Capital)?
In addition, Owners must manage all three kinds of assets in the business:
Balance Sheet Assets, i.e., inventory, furniture and fixtures, leasehold improvements, etc
Other Tangible Assets, i.e., customer databases, key employees, locations, etc
Intangible Assets, i.e., the vision of the Owner, company reputation, company culture, key vendor relationships, etc.
The Owner already has answered “Why survive?” The President is responsible for defining “What?” will be done in order to accomplish the goals of the Owner.
The President now must devise the strategic business plan to achieve that goal. This demands energy, creativity, leadership – and a clear understanding of the Owner’s goals.
The Owner’s vision – the answer to “Why survive this business?” – provides the framework for all of the President’s strategic business choices.
The President Level is the “pickle in the middle”, between ownership on the one hand and management and employees on the other. Clearly, the President’s ability to succeed in managing the “What?” can be undermined if there is inconsistency or lack of consensus from Ownership.
Management Responsibility #1: Determine "How" to Accomplish the President's Strategic Business Plan (to accomplish the Goals of the Owner)
The Management Level is responsible for managing all the elements that are summarized on the income statement, or P&L: managing sales, margins, expenses, profits. And, of course, managing people. This is the day-in, day-out operation of the business.
Frankly, this level is where most Owners tend to find their own “comfort level”. In large organizations, this might be called “micro-managing”; in smaller ones, it’s called “meddling”!
But it’s the same phenomenon, no matter what you call it.
Too often, the time spent by Owners on these management responsibilities is at the expense of fulfilling the “Owner-Only Responsibilities”.
What Does This Mean for Retailing Today?
Retail owners always are in a goldfish bowl. The public knows and has strong opinions about their stores.
Whether they have been aware of it or not, how owners treat the “job” aspects of Ownership radiates to employees, customers, their own family, suppliers, bankers, the community, and all other constituencies.
Success in retail does not depend on “location, location, location”. Nor does selling the latest “must have” product assure success.
Today, the true retail success stories will be written by those companies whose Owners are effectively performing their actual job; doing those things that only the Owner can do. How Owners handle these responsibilities in the context of these times will dictate their own legacy.
©Copyright, The Retail Owners Institute® and Outcalt & Johnson: Retail Strategists, LLC.
Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"