Why You Need to Dig into Your Financial Numbers

October 12, 2014 | By | Reply More

financial numbers

When you really dig in to the financial numbers of your business, there’s always a story to be told, sometimes a story that you just hadn’t been aware of before.

I was working with a client last week, analyzing June sales results. The month had been mildly disappointing, but there was one store in particular that was off more than the others. What do you do when one store takes a tumble?

RELATED: Are You Financially Literate? A Checklist for Managers

In the past, my client had only looked at overall sales dollars to assess how sales in each of their stores were doing. In the past few months we’d started to break down sales results into transaction count and average dollars per sale, by company, store and department, to understand better the composition of sales.

What we noticed in the June numbers was that the average dollars per sale for this one store had risen over the prior year more that month than in any of the other stores, in both dollars and percentage. Correspondingly, their units had also declined more than the other stores.




We then went back two years and discovered that the average dollars per sale for this one store had consistently trailed the other stores, month after month, by 5% to 10%, until the last few months, when that store’s average had pulled even with the other stores (but at the cost of the significant drop in transactions).

As we dug further, we learned that lower priced goods had historically been a more significant portion of the sales mix in that store than the others. In the past few months, however, the inventory mix in that store had shifted away from lower price points significantly enough to seriously impact transactions, and overall dollar sales. The shift in inventory mix hadn’t had the same impact in the other stores, but in that one store it had been dramatic.

Within the hour, my client was on the phone making several special purchases for that one store, to re-balance the inventory mix to meet the distinctive needs of that store.

RELATED: Accounting for the Numberphobic

Quantitative analysis does not come naturally to many independent retailers. Most went in to business because they had a passion for the things they sell and the customers they serve, not because they were data hounds. But customers speak in many different ways. They speak to us one-on-one, face-to-face in the store, as we work with each one. They speak to us as we observe their baskets going through checkout. They speak to us when we observe our displays and see what’s been sold down.

But customers speak to us collectively and most comprehensively, with great nuance and subtlety, when we start digging into the numbers. The numbers represent the facts of what’s really happening, as opposed to what we think is happening. The numbers tell the whole story, not just that part of the story we’ve been able to observe.

The most successful independent retailers are able to break down, crunch, and take from the numbers the stories that their customers are telling them. They use these facts to understand their businesses more fully. The convert raw data into information, and transform that into knowledge. Then they act on that knowledge. The information and knowledge that comes from the numbers makes them better managers, better merchants and better retailers.

 

 


Ted Hurlbut is a retail consultant, coach and speaker who helps independent retailers increase sales, profitability and cash flow by leveraging his deep expertise and proven retail know-how, Get his FREE report “The 16 Essential Elements of a WINNING Independent Retail Strategy” Visit: HurlbutaAsociates.com 

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Why You Need to Dig into Your Financial Numbers
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When you really dig in to the financial numbers of your business, there's always a story to be told, sometimes a story that you hadn't been aware of before. Learn why you need to review and analyze your financial numbers.
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Category: Financial Management

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