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Parker Karnan parker@karnanassociates.com206.601.7019www.karnanassociates.com

Karnan Associates, LLCA small business for small business

Business Breakthrough

What is your Your #1 responsibility

In

Business?

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Are you leaning into

The Dip?

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What is your

“kiss on the forehead”

test?

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How do you slow down your life&

Speed up your business

SIMULTANEOUSLY?

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Are you managing people or circumstances?

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What really is the difference

between

leading and a managing?

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What is your current

Rally Cry?

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A small business is

the direct offspring of

its owner.

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Knowing that you don’t know

something can be a problem...

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Not knowing that you don’t

know something can be fatal.

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Life is merciful, but unfair

Business is unmerciful, but fair

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-Bo BurlinghamAuthor of Small Giants

Good managers do things right.

Good leaders do the right thing.-Warren BennisProfessor on Leadership

Univeristy Southern California

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The best course for any leader is to be feared (respected) and loved at the same time.

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But if it is impossible to be both, then he should choose fear (respect) over love.

-Machiavelli

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Failure of a leader to enforce the rules out of a desire to incur the affection of his followers…

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…can bring that leader to ruin in a hurry.

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-Steven B. SampleAuthor of The Contrarian’s Guide to Leadership

Never make a decision yourself that can reasonably be delegated to an

employee

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-Steven B. SamplePresident of USC

Never make a decision today that can reasonably be put off to tomorrow.

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-Steven B. SamplePresident of USC

If you leave a white post alone, it will soon become a black post…

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Briefly, if you want the old white post, you must have a new white post.

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-G.K. Chesterson

Stewardship rates barely an honorable mention in the lexicon of current business terminology.

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A scan of cover stories business periodicals revealed that ‘strategy’ was explored a total of 57 times.

Stewardship was completely ignored.

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-Life@Work Journal1998

Energy is more efficient than efficiency.

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-Franklin D. Roosevelt

Anything worth doing

at all…

is worth doing poorly.

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-Richard P KarnanSuccessful Father and Businessman

When a new book appears, one should read an old one.

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-Winston Churchill

Effective leaders don’t run their businesses.

If they did, they would be called runners.

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Leaders lead individual followers, who collectively give motion and substance to the

organization of which the leader is the head.

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-Steven B. SampleAuthor of The Contrarian’s Guide to Leadership

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Parker Karnan parker@karnanassociates.com206.601.7019www.karnanassociates.com

Karnan Associates, LLCA small business for small business

Business Breakthrough

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Is my business viable?

Managing problems and opportunities

Focused on Strategy and

Tactics

The entrepreneur’s dilemma:

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Session #1: 1:30-2:40 What to Manage and How to Measure it

Session #2:2:50-3:40 The ‘Kiss on the Forehead’ test

Session #3: 3:50-5:00 How to Lead and build a Team of followers

•Accessible v. Available•Upward mobility v. Downward mobility•Giving up the keys

When to hold on; When to let go

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Revenue per Foot

2009 Sales Plan $1,000,000

Sq. Ft. 2,000

$500 per foot

Quantitative

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Retail is a highly reactive business. As a result you must be highly proactive

Session #1: Know what to Manage

It all starts with the Sales Plan

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70% of your expenses go towards Inventory and Payroll

Session #1: Know what to Measure

Gross Margin

Inventory Turnover

Average Inventory on Hand

Months of Supply (forward cover)

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QUICK TIPS• Footwear capacity: 1500 shoes

• Avg. Retail: $100 X 1500 units = $150,000

• Annual Footwear Sales: $600,000• Turns necessary to justify investment: 4• Annual Sales per Style: 48 pair

Think Real Estate not Product

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Tracking Average Inventory

Rolling InventoryUnits Cost Retail % foot % app % other

EOM March 6800 166000 314000 72% 18% 10%EOM April 7300 167000 309000 74% 15% 11%EOM May 3300 154000 289000 71% 19% 10%EOM June 6900 140000 260000 67% 18% 15%EOM July 7400 151000 285000 74% 15% 11%EOM August 7200 140000 265000 67% 17% 16%EOM September 7500 130000 246000 64% 19% 17%EOM October 6800 122000 232000 65% 17% 18%EOM November 6500 123000 235000 63% 20% 17%EOM December 5800 111000 215000 63% 16% 21%EOM January 6800 150000 279000 70% 15% 15%EOM February 6600 162000 305000 75% 12% 13%EOM March 6700 152000 287000 76% 12% 12%EOM April 6800 152000 286000 77% 9% 14%EOM May 6700 145000 275000 74% 13% 13%EOM June 8500 154000 291000 74% 11% 15%Avg Inv 7017 152500 287167 $213,461 $34,460 $39,246

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QUICK TIPS

Compare current inventory with ideal capacity

Step 1: Know your CapacityItems Per Total #

Columns Column ItemsShelf 1 10 15 150 Shelf 2 10 15 150 Shelf 3 10 15 150 Shelf 4 10 15 150 Shelf 5 10 15 150 Shelf 6 10 15 150 Shelf 7 10 15 150 Shelf 8 10 15 150 Shelf 9 10 15 150 Retail Floor 1 150 150 Total # of pieces 1,500

= Variables that can be changed

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QUICK TIPS

• Remember 3 months of Forward Cover

• The Rule of 4

• Justify Investment of niche categories like Trail, Spikes, and Walking

Step 2: Transfer Unit Capacity to $$ Capacity

Avg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TotalWHLSL $55.00 $55.00 $55.00 $55.00 $55.00 $55.00 $55.00 $55.00 $55.00 $55.00 $55.00 $55.00 $55.00% of Sales 6.9% 6.5% 7.8% 7.5% 8.8% 8.4% 8.2% 10.2% 8.3% 8.9% 7.2% 11.3% 100%

Pairs 468 450 528 504 492 612 498 534 432 678 414 390 6,000 OTB $25,740 $24,750 $29,040 $27,720 $27,060 $33,660 $27,390 $29,370 $23,760 $37,290 $22,770 $21,450 $330,000(based on Total Units & Avg Whsl)

Enter desired # of inventory turns throughout the year 4Total # units sold throughout yr 6,000

= Variables that can be changed

Specialty Soccer Profitability

Our Goal: To quickly find the highest

price at which a product will sell that will achieve our turn

expectation.

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1. Something is wrong with the product.

2. Something is wrong with the price.

3. Something is wrong with the timing.

4. Something is wrong with the visual presentation.

Why won’t it sell?

How to know

1. Get it in the Rotation

2. First markdown of 20%-25%

3. Hard markdown of 40%-50%

Step 3: Create Markdown Strategya) Enter sales discount

b) Enter markdown % over time

c) Enter estimated sell thru % based on prior history and trends

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(a) (b) (c)

Booked Grid Cost Net Retail Full retail Mgn% Disc% Mkdn% Sell Thru

# of weeks $247,500 $450,000 $450,000 45.0%      

7 $165,825 $301,500 $301,500 45.0% 0.0% 0.0% 67.0%

3 $81,675 $111,375 $148,500 26.7%   25.0% 33.0%

3 $0 $0 $0 #DIV/0!   40.0% 0.0%

subtotal $247,500 $412,875 $450,000 40.1%   8.3% 100.0%

(a) (b) (c)

Fill in Grid Cost Net Retail Full retail Mgn% Disc% Mkdn% Sell Thru

# of weeks $82,500 $150,000 $150,000 45.0%      

13 $82,500 $150,000 $150,000 45.0% 0.0% 0.0% 100.0%

0 $0 $0 $0 #DIV/0!   25.0% 0.0%

subtotal $82,500 $150,000 $150,000 45.0%   0.0% 100.0%

Total $330,000 $562,875 $600,000 41.4% 0.0% 6.2%

= Variables that can be changed

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The best buyer combines a great eye for product with a disciplined

flow and markdown strategy

QUICK TIPS

• Blend of art and science

• A well told bad story is better than a poorly told good story

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70% of your expenses go towards

Inventory and Payroll

Session #2: The ‘Kiss on the Forehead’ test

Gross Margin Return on Investment (GMROI)

Gross Margin Return on Employees (GMROE)

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Return on Inventory Investment

Annual GM$ 450,000

Average Inventory @ Cost $150,000

$3.00 ROI

Cost Analysis

• $2.00 is break even

• $3.00 is profitability

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Return on Employee Investment

Annual GM$ 450,000

Annual Payroll* $150,000

$3 per Employee*Does not include owner comp, taxes, or benefits

Cost Analysis

You owe your employees a healthy business

What instills company loyalty?

•Avoid the popular trap: Establishing Expectations

•Avoid the spectacular trap: Building a Team

•Avoid the power trap: Encouraging Authenticity

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The Non-negotiables 100% compliance

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Creating value in Specialty Experience

Sales Associates: It must be measured to work

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Expanding your contribution and value

Assistant Manager: Moving towards “Buy in”

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Bringing your talent & passion to the organization

Manager: Moving towards Stewardship

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Healthy Team Culture

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The first 60 days: Setting the Expectations

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3 to 5 months: Defining Progress

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6 to 9 months: Cultivating Talent

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1 year: Establishing a Team

Create

A

Rally Cry!

•Operation Race Weight

•Walk out Bonus

•Spoil the Customer

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Invulnerability

Artificial Harmony

Ambiguity

Low Standards

Status and Ego

The Five Dysfunctions of a TeamPatrick Lencioni

Cost Analysis

• Personal reputation v. Potential for greatness

• Short term consequences v. Long term vision

• Personality v. Character

Is this your job or your profession?

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First: A honed skill as distinguished from a mere skill

Second: It is an occupation pursued largely for others and not merely for one’s self

Third: It is an occupation where the amount of financial return is not the accepted measure of success

A profession is:

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Download these materials and other business tools at

www.karnanassociates.com

Karnan Associates, LLCA small business for small business

Business Breakthrough