Ian's Bits & Bobs: The Blog

t5np14Nov2018

T5NP*: Fourth Number – Labor Dollars

Between 65% and 80% of all the money that independent garden retailers receive as Sales Dollars is spent within the next few weeks or months on just two aspects of running the business: Inventory and Labor.  So yes: Labor Dollars is a BIG important number!

The range of labor costs as a percentage of sales in all types of retail can range from the low single digits of a warehouse “club” to the high 20%s, even the low 30%s in a lavishly, full service, up-scale store (the sort of place you have to ask them to let you in…). The range in a typical independent or local garden retailer can be from 15% of sales to the high 20s, depending on the service model and the competency of the management.

A Burden Or An Investment?

But as you’ve heard me say, dollars pay the bills, not percentages, so let’s look at what that means in real numbers. When we talk about the labor bill (and when we track it in the 5 Numbers Project), we are taking about the whole cost of labor, not just the wage the employee gets. The “human” costs of employing others (sometimes called “Burden”) are unknown to many employees. Well, unless someone told them, how would they know anyway? I didn’t when I was an employee.

This labor total includes the actual wage plus all payroll taxes and fees, plus the employer’s contributions to things like FICA, FUTA, Workman’s Comp, Health Insurance, Vacation Pay or PTO, training, conference travel and even uniforms. If it is part of having human beings working at your company, we include it. Depending on what state you operate in, this can add up to 30% or more to the hourly cost, making a $15 an hour employee cost the company more like $20. I just heard from a client this week that their health insurance alone now works out at an extra $3.50 an hour (but their poinsettia prices haven’t gone up in years…)

So the rise in labor dollars is something we are closely following, especially in a good economy when employees have some leverage to bargain with. Just from watching the trends of this one number, questions emerge: Is our rise in labor dollars more or less than our rise in what pays for it, i.e., Sales Dollars? Are Gross Margin dollars going up quicker than Labor Dollars and if not, how do we make that happen?

Making Informed Decisions

When Labor Dollars are a focus of management, buyers who discover that next “killer” item, can now ask themselves if the extra labor cost associated with this new product will negate all the extra margin dollars it could bring in. That’s a “hmmm…” factor. (It might also be a good negotiating point with the supplier!)

When you closely track your labor costs, it almost becomes second nature to think of the value of the task the team are currently doing. Are we matching employee costs to the value of the task? Do we have employees costing $24 an hour doing tasks that could be done by someone costing less, and if so – is there an employee growth opportunity? I know a manager who once calculated that, because of their disorganized receiving system, the labor cost of unloading a truck was about the same as the Gross Margin dollars in that load! (That’s an Arrrggghhh!)

So, as you can tell, we do watch all these numbers very closely. As Labor Dollars are the second biggest cost after Inventory (and exponentially more than the marketing budget!), we especially track the trends and changes in this one.

Click here to learn more about The 5 Numbers Project: a national initiative to create valuable benchmarking & visual dashboards that will increase profitability for independent garden centers. And stay tuned for the last of the 5 numbers – Labor Hours – next week.

Nov 14, 2018 0 Comments
t5np21Oct18

T5NP*: Second Number – Customer Count

(We say “Customer Count”- aka Register Rings, Tickets, Baskets or Checkouts)

I am always a little surprised at the number of owners and managers who DON’T track or even think about this metric. Surely just from a Return on Investment in marketing aspect it should be one to watch. Savvy operators are currently using this metric trend to see what effect the switch from traditional media marketing to social media marketing is having on the number of shoppers coming in the door.

The number of customers who volunteer to spend their precious time and money at your store is first and foremost a reaction to the company’s value proposition. It’s the public’s response to your marketing, promotions, reputation, drive-by appeal or their previous shopping experience. It’s the public’s “secret shopper” report – every day.

Just for starters, a history of customer count by the hour is very useful for team scheduling so you don’t have 5 employees gathered round the register at 8.00am, but only two out selling in the after-school rush at 4pm!

Context Is Necessary

Customer count is influenced by outside events or circumstances and any record of it must also have a note of the business conditions in that time period. If it rained heavily this week last year or there was a major ball game on TV that weekend last year, managers should know before they react to the number.

We are always cautious about comparing one day, week or even a months’ data in this metric so we look for trends in the customer count more than specifics. I’ve seen too many owners stress out on a couple of lower-than-expected days or weeks. The sky is probably not about to fall if customer count is down 10% in a specific spring. That’s why we will be building anonymous regional groups in The 5 Numbers Project so you can see if your customer Count IS 10% down when your local peers are all up. (Then there’s a reason for a ‘hmmmm’….!)

Interesting, But Now What?

If customer count is going down, it might mean a marketing challenge to recapture lost traffic or stimulate new shoppers to try your offer. In that case budgets should be geared to boosting external messages, marketing, image, exterior remodeling, building community relations and so on.

If customer count is going up, you may have a sales and merchandising challenge serving and inspiring all those extra people to spend while in your store. In this case, budgets should invest in more internal resources for improved hiring, training, buying, merchandising, silent selling and just generally helping customers spend more.

Just think, so many significant management decisions from one little number! (That’s another Hmmm….!)

Next week, we’ll tackle the third of The 5 Numbers as we gear up to open subscriptions in the Project (*T5NP) … stay tuned!

 

Oct 31, 2018 0 Comments
Youre-invited16Oct18v2

The 5 Numbers Winning Garden Centers Use (and still have a life!)

Traveling the country working with independent garden retailers, I know that owners and managers constantly wonder how their year compares with that of their peers 300 or even 3000 miles away. The fear of falling behind industry standards is understandable when you are working hard in your own trenches! It’s easy to feel isolated. I get asked, “what are you hearing this year, how are others doing?” a LOT.

As I mentioned in my last post (9-2-18): the good are getting better and winning market share from the less successful. For many years we have focused our business on helping our clients use the numbers that really matter. While there’s a lot more to success than just a few data points, most of the winners do in fact use just a few data points to make the good decisions that keep them winning. That’s their “secret sauce”!

TMI!!

Now that almost everyone has POS, too much info can be the problem, not too little. Data is available on every aspect of the company, from buying strategies to performance reviews. Owners and managers simply don’t have the time to clarify what is crucial from what is just interesting! So they either don’t use the data although they have it, or they get buried in the wrong data. Unless you are going to invest in extra staff to track and analyze all the data, it just puts more work on the same few people.

So how do owners and managers decide which data points matter most?

It’s Just 5 Numbers

Simply, they let us help: we have narrowed the answers down to just 5 Numbers each month. These, together with a few simple but crucial “offspring” calculations, allow retailers to make the right decisions without more office time and endless reports. Some of our clients have been using this approach for over 10 years and are absolutely “beating the street” when compared against the industry in general.

We focus on what matters most in retail. With 60% – 80% of sales revenue being spent on just two costs, inventory and labor, we keep the “numbers” where they matter for time-crunched owners and managers.

From just 5 Numbers our clients can track sales and/or customer growth, margin management, customer spend, labor efficiency and retail profitability.

But unlike traditional industry reporting, which focuses on the topline of Sales Volume, we go down much deeper to see what’s left after inventory and labor costs, or “Gap Dollars” for those in the know.

Gap Dollars, (accountants might refer to it as ‘Margin after Labor’) is like an operating profit. By subtracting the costs that you have quick and relatively easy control over (like Costs of Goods and Labor) from sales, you can see what’s left to pay those expenses which are hard to reduce such as rent, admin, energy, debt repayment and so on.

If that particular number, Gap Dollars, is not increasing faster than the cost of being in business, you’re going backwards no matter what the topline sales numbers tell you!

Share and Compare – Finally!

You may be aware that Dr. Charlie Hall (Texas A&M) has recently launched a national key performance indicators sharing network for growers. We are using the same platform (yourmarketmetrics.com) to create “The 5 Numbers Project” (T5NP) for garden retailers: secure, online, anonymous business comparisons, available at your desktop 24-7.

What’s the goal here? We believe there is a strong desire to have credible national industry data to compare with to see how the industry is doing as a whole, and to track your OWN business’ performance in a visually compelling way that speaks to people beyond the beancounters. We want you to have a confident answer when your loan officer says, “How do you compare with the industry?” or when you are trying to value your company for sale or generational transition.

Best of all, the dashboarding format will give you an easy way to visually SHOW your team the metrics you want them to focus on … so they can help you move the needle where it matters most.

All are welcome!  

Importantly:  ALL independent garden retailers are welcome to join this new industry-wide benchmarking project, regardless of what peer group, buying group or networking group you already belong to. All are welcome … as long as you’re a retailer. (We love our vendors, but unless you have your own garden retail numbers to share (ANONYMOUSLY, of course), then this isn’t the project for you.

The first round of subscriptions will be open only from November 1 – December 23, so you can be onboarded and up to speed before Spring 2019 hits. Every Tuesday for the next 6 weeks here on Bits & Bobs, we will feature one of the 5 Numbers and what it can do for you, and share more about how the platform will work:  stay tuned!

Oct 15, 2018 2 Comments
Sun River pic

More than a Photo Stop

If you are in garden retail, summer is the time to take a break after the spring zing and maybe join one of the many garden center tours and meetings offered in various states. It’s a great opportunity to spend time with like minds, share stories and ideas with one’s peers across the country. Having seen plenty of garden centers myself this summer from Seattle to Boston and knowing there is another tour this coming week, I wanted to share some of my stories from 30+ years of doing just that:

If you’ve heard me speak recently, you already know we are seeing a serious polarization in the independent or “local” garden retail channel. It’s similar to what happened in the local hardware channel in the 1990s, when around 50,000 retailers shrunk to around 18,000 now. But those survivors are now thrivers!

The Good Are Getting Better

It’s very clear from the last few years that in the family-owned, privately-held garden retail channel, the good are getting better. They are winning market share (often in the same town) from the less good and this year’s data from our two network groups and clients validates that observation. The better-managed companies are making more margin dollars and, for those in the know, more “Gap” dollars, even if the sales “topline” looks similar.

So as you tour these stores, look beyond the photo-shoot displays and clean bathrooms. Ask the questions that really matter: Where did they get their inspiration and ideas? How did they know it would pay off? Who do they seek counsel from and make critical decisions?

Early Adopters

I am guessing you’ll find that your hosts were early adopters and networkers. Although ANLA’s Management Clinic sadly ended six years ago now, I’ll bet your hosts were regulars there, networking and learning from 7am to 1am. I suspect they were early adopters of capital improvements such as state of the art greenhouses, benching and signage. They were probably early adopters of network groups, training programs and, dare I say, they might even be among the 730 people who went on one of our 16 England Garden Center tours.

I have spent many hours wondering what makes a winner in this channel. It starts with a clear vison based on months or years of collecting the data/evidence of others’ successes and failures. It continues with a clear feasibility plan which is pre-loaded with strategies for expected (and unexpected) challenges. They have a strong Plan B, an ability to measure and monitor, and an openness and a preparation for change mid-dream if necessary. They are also ready to make some unpopular personnel and/or family decisions (try firing your sister or putting your Mom on a 90 day write up…).

Leverage and Risk

These winners invest more than most others are comfortable spending. They accept risk that stops others sleeping at night and they hire people who know more than they do. Two of our clients borrowed loans equal to their annual sales in the previous year (those were the days when banks were partners!) – while in their twenties…. Another bought out their parents but only if they agreed to move 100 miles away – think about that one!

I know owners who invested early in POS while others shunned it because of their own dislike of computers. We have a client who 12 years ago spent over $16,000 on a sign machine while other more established and larger nurseries scribbled on the back of an old J&P sign. We have clients who travel thousands of miles to see stores not in the garden business, just to keep up with general retail. They all have a passion to learn and keep moving forward, to constantly challenge and “change it up”. They simply don’t say (or tolerate their team saying), “That’s good enough”.

After so many years in the trenches I could go on (yes, I know, I DO go on…) but the key takeaway from working with some of the best in the business is that there are clear, consistent reasons for their success: vision, focus, risk and the humility to constantly learn and change.

The lesson? You can’t take a picture of that. If you’re heading out on a tour, we encourage you to ask the same questions that your hosts asked … and still do. Because another probability of these winners is that they will openly share their successes and failures with you (well, as long as you are not three miles away – they’re not dummies!)

PS: On that timely tour topic, some of you readers may be touring one of our favorite clients this week in Utah – Sun River Gardens (https://sunrivergardens.com/, pictured in header). Take a close look and ask those deeper questions to Scott and Tanya: they are rightfully proud of all that they have accomplished, but it didn’t happen overnight … and it wasn’t easy!  Kudos to them, and to ALL of you – the garden centers who take the time and expense to tour whoever is moving the needle, so you can move it yourselves. That’s how an industry moves forward.

 

 

 

 

 

Sep 2, 2018 10 Comments
Instagram Eric HP Haul

The Rise and Rise of the Under 35s

Right now most owners and managers in the retail garden business are in “can we catch up with budget?” mode after a late, cold spring season and are probably not worrying too much about demographic trends. So mark this as a “should look at this again after Memorial Day” doc and circle back when you can raise your head above the trench.

The Cavalry is Coming

Talking of military analogies the cavalry, in the form of the under 35 year old householder, is coming over the hill to save the garden industry – just in time, as female Boomers continue to disengage.

As an Analyst and Commentator for the 2018 National Gardening Survey (NGS) (www.gardenresearch.com) I have the opportunity to look at the data regarding the American consumer’s participation in and spending on “gardening”.

First let me say that we (i.e. the NGS team) do not fixate on a single year’s data, even though both gardening spend and retail sales hit all-time highs in 2017 – which would be very tempting headlines. But we do look very closely at consumer spending trends over 6 year periods and even more crucially at the participation data. People remember what they did last year more accurately than what they spent last year.

In fact the 77% of all USA households who report doing something in the garden IS the highest ever in 35 years of the NGS. (Which other industries selling non-essentials can claim a 77% participation? But I digress.)

While participation in gardening stayed flat among households of those over 55 years of age, it continued to rise in the households of under 35s. They are not yet spending the same amount of money as their older siblings and parents but they are now seriously engaged in more than just houseplants and veggies. Under 35s have caught up with older groups on participation rates in what were until recently bastions of “settling down” such as DIY Landscaping, Container Gardening (no hole-digging for them) and purchasing tools or equipment. I think we can now say that the under 35s are “all in”.

Load, Read, Fire!

Nestled in the 250+ pages of NGS data, something caught my eye. Twenty years ago, the NGS showed that the biggest consumers of “Gardening Information” were females over 55 years old. The 2018 NGS shows that same data point to be the under 35s and male…. Hmmm. Furthermore, they are buying information online the way people bought magazines 20 years ago. Although we are always cautious about one year’s results, millions of households say they acquired a gardening app last year alone!

Failure is Not an Option

Not only does this fact confirm the switch to digital media, it also suggests that this age group is serious about getting it done right the first time, AND that they are comfortable using silent information at least in the first stage of how-to learning. As if to confirm the confirmation, I also found another little factoid: The under 35s have shown steady growth in using the Do It For Me services of landscapers. It seems that the more affluent under 35s are much more prepared to employ others to do some of the garden chores than the previous generations were at the same stage in life. That’s another – BIG – hmmm…

So, what are you doing to meet, welcome, educate and assure younger householders’ success in their digital space, so they get it right the first time? That would seem the best way to win their loyalty. To them, first-time success is an essential part of the ‘shopping experience’ about which we are now hearing so many clichés.

Please join in the comments, let us know how you are tackling this huge opportunity – when you can raise your head above the parapet!!

Happy selling!

photo credit: Portland Nursery’s Instagram Account

May 21, 2018 2 Comments