The New Year is here: 2009 can be fine—if you plan your sales and net profit correctly. Here are quick tips to make your planning and execution more reliable.
After the last three months it is time to pick ourselves up, dust ourselves off and get to work making money in the coming year. Goal setting is where the rubber hits the road. By visualizing and planning today you will know immediately whether you will make it following your current business model or if you are going to have to make big changes in how you operate. This is, truly, where the rubber hits the road for your business.
Wishing, dreaming and hoping are great, but they won’t make you money. It takes decisions and deadlines to visualize a plan to make wishes come true. Planning sales for a window coverings business is easy for a home-based business. And, it is not too hard for a retail storeowner with multiple decorators and good business experience. It is the in-between business that has troubles: A retail store with a single owner/decorator selling is an unstable model. If the store is not providing four to six appointments a week, about one a day, making a living may not be possible.
It is time to get larger or smaller, and then make your plans. The best answer for most is moving to home. It happened a lot this year, and will continue. Even a major West Coast chain closed over 100 stores to go shop-at-home. Any personal business operator in a store needs to think real hard.
HOW TO PLAN YOUR SALES
The first essential is to understand there are only three things that affect your sales. As longtime readers and attendees at my classes know, they are:
2. Closing ratio
3. Average size of sale
Next, go back for three months and see what your current baseline is. With September and October being so exceptionally low for many, maybe take July to September to work out a monthly average. Whichever three month-period you use, simply count your appointments, count the customers you sold, and count your sales. Divide each by three and you are ready to begin.
First, calculate your closing ratio: Divide customers sold by total appointments. (Example: Monthly average appointments: 15. Monthly average customers sold: 9. Results in: 9/15 = 6, or 60 percent closing ratio.)
Next, divide your total sales by the number of customers you sold last year. (Example: Divide your average monthly sales: $16,000 by your 9 customers a month. $16,000/9 = $1,777 average size of sale). Your size of sale will be determined by whether you sell blinds only ($1,200 to $1,500 is common) or a balanced mix with draperies ($1,800 to $2,500 is common. Top pros are averaging $4,000)
Now you are ready to plan your coming year. I recommend you plan fewer appointments and higher size of sale. You can achieve more sales by taking more time with customers, having creative ideas and by taking training to improve. Read great books and listen to audio recordings by Tom Hopkins, Zig Ziglar and others. You may also want to check out Window Coverings University, which I have ownership.
SEE THE IMPACT
OF SMALL CHANGE
You can see the power of small changes in Chart 1. Notice, while everyone wants to improve closing ratio, the real sales improvement is by increasing your average sale. You do this with education for creative ideas and better selling skills. Note the “Sweet Spot” that is shaded. Increasing average size of sale is what makes the difference. You get there with draperies!
BEST WAY TO IMPROVE NET PROFIT
Your final step is to increase gross margin. The same principle applies: Benchmark your past 90 days by job costing every sale, then total and your costs and selling price. If your average per month is $16,000, per the example above, and you find your costs are $9,500, divide $9,500 by $16,000. Your costs represent 59 percent of sales. Subtract from 100 percent and your gross margin is 41 percent.
Not bad for a blinds business, but you should be at 48 percent and higher with more drapery sales. Consider the small changes possible and the huge result.
In Chart 2, notice with no increase in appointments and no improvement in closing ratio, gross profit is up by almost 36 percent—a total of $28,126. Compare that to your net profit after paying costs and commissions. It could be a 50 to 100 percent improvement.
Yes, goal setting and education are worth the investment of time and money. Competing in a new era is all about upgrading to draperies and improving skills to beat competitors. That is where the rubber meets the road. If you do it right you will be speeding ahead while others are off in the ditch. Best wishes for a great New Year.
This article is based on Steven C. Bursten’s actual experience with sales and financial information working with hundreds of window coverings businesses. Bursten is co-founder and CEO of Exciting Windows! a network of experienced and aspiring window coverings professionals. He also co-founded the International Window Coverings Exchange, Window Coverings University, and WCU Online, and is the founder of Interiors by Decorating Den. Whether you are a sole operator of a personal business or manage 50 window fashions consultants, this series will help you improve sales and increase profitability. Bursten encourages questions and comments at steveb@ExcitingWindows.com