T5NP*: The First Number is Sales Volume… (and that’s just the start!)
In conversations with owners and managers about the year or business conditions, the topic sooner or later turns to sales volume. There is always a reluctance among strangers to avoid “the number” – so we tiptoe around with questions about the number of employees or registers or parking spaces instead. Sometimes you’ll hear phrases like “north of $2 million” (but never “south of $500 mil”!)
This traditional reluctance should be a thing of the past. In today’s tough retail environment, networking and sharing are welcomed by more and more operators as a competitive advantage. The more we know, the more likely we are to make better decisions.
So there’s no problem with owning a retail store that sells $850,000 a year, unless and until you dig deeper to see what the other metrics show about today’s operation and what sales have been in the past! Current sales volume is just a number documenting a step on the ladder that many other companies have occupied at some point in their development. Similarly, there’s nothing fabulous about “doing $25 million,” unless and until you look under the hood. There are many famous retail brand names which once boasted billions in sales, but are no longer around.
It’s just ‘a place on the ladder’ … and the important denominator
Sales volume is just a marker of size – a place on the graph or ladder to higher volumes. Sales on its own has little merit with few, if any, lessons to be learned on its own, except maybe local bragging rights. But if that’s all there is to work with I can at least look at the growth (or lack of) in sales over the years and ask the question, “Are the sales going up as least as quickly as the rise in the costs of doing business?” That’s our first Hmmmm….
As we will see in future blogs, that sales volume number is crucial when comparing margin dollars earned from those sales, or labor costs to drive that volume and so on. In fact sales volume is the denominator for several of our standards and comparisons on the retail dashboard from Gross Margin dollars to Labor Productivity. And you want to be able to see improvement in those numbers for your own company over time.
(But we know you still like to compare).
One of the features of The 5 Numbers Project within Your MarketMetrics is that it will be filterable by business size or geographic region … so you can compare yourself to “others like you” more readily. When there are at LEAST 5 businesses in each category, layered filtering (size AND region) can be ‘turned on’ – our primary objective is maintaining anonymity.
For now though, the first of our five numbers is a really just a marker, which on its own and without “lifting the lid” on the other performance metrics, has limited value. But it’s an essential starting point to our project – oh and useful for local bragging rights too!
So, are you all “south of $500 million” out there? We are!
Next week, we’ll dive into learning more about number 2 in T5NP: Customer Count/Register Rings/Tickets – stay tuned!
*T5NP – this post is the first in a series as we begin to launch The Five Numbers Project