Key Performance Indicators:Knowing What Counts

Spreadsheets vs. analysis– Are you staring at lists?– Can you truly ‘analyze the columns’?

What should be measured? What should we analyze? What’s the difference?

Key Performance Indicators

Break Even Point

GMROI

Turn Rate

Delivered Sales Per Square Foot

Percent of Repeat Customers per Date Range

Net Delivery Cost Percentage

Change in Cash

BREAK EVEN POINT

What is a Break Even Point? (BEP)

Revenue and expenses are equal Calculating BEP

– BEP = fixed cost / contribution margin » Or

– BEP = fixed cost / sales – variable cost

Why Should You Care About Your Break Even Point

Black Friday – – That point in the year where retailers

traditionally make a profit. Every month has a Black Friday. Are you seeing financials once a year?

– Once a quarter?– Do you know your best month?– Why is it so great?

Why not break even info on-demand?

Do You Know Your Actual Monthly Break Even?

Long Term Planning

Taking on Debt

Marketing Considerations

Break Even Point Example:

TURN RATE

What is Your Turn Rate?

Low Turn Rate Could Indicate: Over stock on inventory Inventory obsolescence Deficiencies in line up Slow vendor shipping Container purchases

High Turn Rate Could Indicate: Inadequate inventory Too low margin Excellent vendor shipping Focused spiff program Advertising success

Low VS. High Turn Rate

Retailer A:

$200,000 in inventory $400,000 in cost of sales Results: 2.0 turn rate But what is my true inventory

performance?

Retailer B:

$133,300 in inventory $400,000 in cost of sales Results: 3.0 turn rate Is my margin included?

– No - turns will give me velocity, nothing more

Example:

Turn Rate Example:

BDG

LRU

BRM

LRL

DRC

DRF

ACC

RUG

0 1 2 3 4 5 6 7 8

7

4.6

3

2.3

2.1

1.4

0.85

0.73

Turn Rate

Annual TurnsCa

tego

ry

GROSS MARGIN RETURN ON INVESTMENT (GMROI)

Gross margin $$ for one yearAverage inventory $$ on hand

=GMROI ($)

Determine your store average as a benchmark– Then find the winners and losers and act

on them

GRMOI

GMROI takes into account all of the following variables:– Landed cost– Gross margin– Packaging (2 packs, 6 packs, etc.)– Shipping time– Rate of sale– Selling price– Markdowns

GRMOI

What is the true impact of GMROI?– Sales of $1,000,000 at 45% GP = $450,000 GM @

2.5 turns = $220,000 average cost: $2.05 GMROI– Sales of $1,000,000 at 45% GP = $450,000 GM @

3.5 turns = $157,000 average cost: $2.87 GMROI• Oh, and we freed up $63,000 of cash!!!

– Sales of $1,000,000 at 50% GP = $500,000 GM @ 2.5 turns = $200,000 average cost: $2.50 GMROI

– Sales of $1,000,000 at 50% GP = $500,000 GM @ 3.5 turns = $142,900 average cost: $3.50 GMROI• And, we’ve now freed up over $77,000 in cash!!!

– So isn’t it easier to concentrate on the item / category / vendor GMROI and let the dollars flow to the bank?

GMROI

GMROI Example:

ACC

LMP

BRM

LRO

DRF

DRC

LRU

BDG

$- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00

GMROI

Avg GMROI

DELIVERED SALES PER SQUARE FOOT

Is each category performing? Where will I put this new collection? Which departments can be trimmed? Which can be expanded? Which vendors are over/under

performing?

Why Does Delivered Sales per Square Foot Matter?

Dollars per square foot– By category– By vendor

Benchmarks – – Vendor help (display departments)– Franchise company figures

Query trade publications Benchmark your store

– Compare your departments to the store What is a good store average?

What Should I measure?

Delivered Sales Per Square Foot Example:

DRC BRM BDG DRF LRU STR AVG

LRO LMP ACC $-

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

$450.00 $435.00

$385.00

$300.00 $275.00 $275.00 $265.00

$150.00

$27.00 $12.00

Sls/Sq Ft

categorySA

les

PERCENT OF REPEAT CUSTOMER PER DATE RANGE

Isn’t Having Customers Good Enough?

Effectiveness of marketing Service levels Success at building loyalty

Why Monitor Percent of Repeat Customer?

Selling Mostly New Customers Low customer loyalty Could indicate that you are

lacking in service levels Product not the quality

expected Effective public marketing Demographic of the area

Selling Mostly Repeat Customers Poor public marketing Excellent service levels Message is old Product only addresses current

aging customer base Extremely effective private

marketing

Repeat Business Concerns

What is New vs. Repeat Ratio?

Why is this important? 20% of your customers leave the

market– Move– Die

How do I measure this? Marketing tools?

– Is this a trap?? What is easy to get – first time

Percent of Repeat Customers Example:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

8

1315

1922 21

23

9 8

2224

6

% Of Repeat Customers

NET DELIVERY COST PERCENTAGE

What does it include?– Percentage of wages/benefits

• Drivers• Prep/deluxe• Service• Scheduler

– All delivery vehicle costs Delivery cost = number of

stops/delivery expense

Do You Know What Your Net Delivery Cost is?

Delivery Cost Example:

6.0%

7.5%8.4%

9.0%

10.7%

13.0%

8.4%

12.0%

10.0%9.0%

8.0%7.0%

7.5%

Delivery % of Sales

CHANGE IN CASH

Why Should You Care?

Why Should You Care?

Ever write a check to cover payroll? Do you know what your inbound

accounts payable expenses are? Do you wish you could forecast cash

on hand? Are you tracking the trend?

Change in Cash Example:

0

50000

100000

150000

200000

250000

Cash On Hand

End of Qtr CashCA

SH

Key Performance Indicators Analysis vs. Spreadsheets

Knowing What Counts!

800.888.5565www.profitsystems.com