Monthly Archives: April 2011

The Hard Work of Creating a Mission Statement Makes Everything Else Easier

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Where to begin? The idea of picking retail topics to write about, not to mention the very first topic, is pretty daunting to say the least. Inventory management, hiring, training, sales tips, merchandising, cash flow, or advertising only touch on some of the day to day areas of focus that a retail owner or manager has to tackle. But before we dive into all of those, let’s start at the beginning…

The Best Place to Start is at the Beginning

The reason why

Before I opened Fitzgerald’s Bicycles, I took a small business class that focused primarily on writing a business plan.  Crafting the perfect Mission Statement was A#1 on the list of where to begin.  Yeah, sure I’ll jump right on that… as soon as I fill out my business license, set up my insurance, debate who has the cheapest credit card processing fees, paint my sign, build a work bench, figure out where to buy slat wall, print up some t-shirts, freak out about how expensive advertising is, and become a master at quick books.  You want a Mission Statement?  How’s this “Fitzgerald’s exists to avoid bankruptcy, make payroll, and remember to check the answering machine every day”.

By the time I remembered that companies usually have a Mission Statement, I was four years into business ownership wondering what it was I set out to do in the first place.  Over those first years (Fitzgerald’s 1.0 – 3.2) my customers made up for my lack of clear goals by telling me what it was I was doing.  They told me what to order, what hours to keep, how much to charge, what events to sponsor, and even what my slogans were.  Don’t get me wrong, that was awesome!  But there comes a time when every business owner wants to take back control and actually steer the ship in a direction you want to go in, at a speed you feel comfortable with.  Sure I was selling more stuff every year and hiring a few more employees, but why?  What was it all about?

A good mission statement is functional.  When you are stuck on a hard decision to make, turn to it for guidance.  Should I buy the 100% recycled paper, or the cheaper 75% recycled?  Bring on another employee, or dig in deeper yourself to get the job done?  Well, how do these choices affect your mission?  If your mission is to support environmental efforts then buy the 100% recycled.  If elements in your mission require you to free up your time to grow, then hire the extra employee.

The mission statement functions as a stress reliever also.  In the day-to-day stress of running a retail business, it’s easy to get overwhelmed and burnt out.  If you are staying on target of your Mission, then it gives you long term focus that makes it easier to live with the day to day chaos.

Also, don’t forget about the function of getting your customers fired up about who you are and why they should spend dollars with you.  Customers love to support passionate businesses and will key in to your mission if it’s genuine.

What the finished product looks like

There I was… alone in my office, wiped out at the end of a long day, with a blank computer screen staring me down and punctuating the torture with that stupid little blinking cursor.  I curse you, you stupid blinking cursor!  How hard could it be to write a mission statement?  All of the experts tell you a mission statement should be short (1-2 sentences)and lay out the big picture goals of why a company exists.  Piece of cake.  Actually, absolute torture to the small business owner, who barely has time to check emails let alone engage in high level, focused, creative, word-smithing.

“Fitzgerald’s Bicycles exists to provide the highest level of customer service while offering quality bicycles, bicycle repair, and bicycle accessories in Jackson Hole.” Mark it Donny, Mission Statement done!

I actually can’t remember my first one but it was along these lines.  I covered who we are, what we do,  and where we do it.  This statement lets my customers know that we strive for the highest level of customer service and we only sell quality products.  So why am I about to tear this statement to shreds? For the same reason I can’t actually remember how it read.  Because it carries the same punch as the mission statement for a fence post store, “Acme Fence Posts exists to provide the highest level of customer service while offering quality post pounding, posts, and post accessories in Wankerville”.

My first cut at a mission statement carried no message of where my passion was, it felt rehashed from some “Small Business Ownership for Dummies”, and was only a reflection of my desire to get the whole exercise over with.  Basically, the sign out front covered about as much.

How was this statement to keep me from getting stressed, help me to make tough day-to-day decisions, or build long lasting customer loyalty?  It wasn’t.

After a few years of living with my yawn-inspiring mission statement, I went back to the drawing board and took another shot at it.  This time though, I was feeling really worked over.  Now I had a staff into the double digits, yearly gross sales approaching seven figures, and a tax bill that made me finally understand why there are Democrats and Republicans in the world.  But the craziest stat of all: I wasn’t making any more money!  Nothing like working harder for the same amount of money to get you motivated.

I took the time to do it right this time.  Here’s the mission statement that stuck around to this day and hasn’t come close to wearing out it’s welcome:

“Fitzgerald’s Bicycles exists to grow CYCLING, the fortune of our PEOPLE, and respect for the PLANET”

I’m not here to tell you I think this is the best mission statement ever written and is the benchmark by which all others shall be judged.  No, I’m here to tell you this statement works for us.  That’s the key to all of this, a mission statement needs to be uniquely effective for the company who owns it.  For us, this mission statement tells the world why we choose to come in and open the doors each day.  We are passionate about cycling and want to see more of it in the world.  We want our people (employees and customers) to feel fortunate that we open the doors each day.  And we want to make a positive impact on the planet by acting thoughtfully about our business practices.  That’s it – everything else is gravy.

But how about Acme Fence Posts?  Can’t really say for sure, but maybe the mission statement they really want is:

“Acme Fence Posts works to reduce the rate of juvenile swimming pool deaths by selling attractive and affordable back yard fence posts at a price every family can afford.”

How it really works

I’ve now been a part of three other successful mission statement exercises for other entities (which really only puts me at the advanced beginner stage) and the technique I’ve found to be the best begins with a good old-fashioned brain dump.  If you’re into cool tech tools, I highly recommend the free, open-source mind map program called FreeMind. If you have a hard time turning off your Facebook alerts and like to stay up on emails every five minutes, a blank piece of paper and pen work great.  Whatever you do, try to really stop everything else that’s going on and spend at least an hour focusing solely on this project.  You’ll thank yourself for years to come for carving out this time!  Personally, I work best on this stuff during an airplane flight with a blank notebook.  It’s hard for me to unplug so the isolation chamber of an airplane is priceless (don’t expect me to sign up for Boingo on-board wifi anytime soon).

Blocking out all other distractions that are constantly tugging at your attention is really the hardest part, and don’t feel bad if it takes a few attempts – keep at it.  Once you do get into your groove, just start writing down everything you love about your store, job, employees, customers, industry, etc.  There is no wrong answer and everything that comes to mind deserves to be on the page for now.  After you have your list, read through it a few times and write down the last  thoughts that come trickling in as you review.

First step to get you going

If you really buy into the importance of being a mission-driven company, dive in and start your brain dump! Remember, a Mission Statement without the buy-in of all the owners is not really worth the time it takes to write it down.

Now go back over your list and highlight, circle, or check mark the most important words or phrases.  Which ones really get you fired up and are at the heart of why you do what you do?  Shoot for more than three and less than 10.  Do any of them have some similarities?  If so, try to find a word or expression that sums up what they all mean.  If one of the biggies is, “make a ton of money” or “early retirement” and you’re afraid to let the world know that’s why you’re in it, don’t be.  Most of us feel okay with a profit at the end of the day and few of us think early retirement is a bad thing!

So now you have your list.  Hopefully with some grouping the list has thinned down to the single digits.  If it hasn’t, think again about your real motivations for being in business and eliminate some of the other words that are really just supporting players like, “provide excellent customer service”.  For most businesses that’s a given, but really should be left to a follow-up ‘statement of organizational values’ (let me know if you want to know more about “organizational values” in a future blog).

The only thing left is the word-smithing that felt so painful the last time you tried to write one of these.  This time though, the sentences should kind of fall together.  Of course you’ll need to choose a few verbs like “exists”, “works”, “provides”, and the like.  If you can dig up some fresh ones, great.  If you fall back on the tried and true “exists” like I did, that’s no problem.  The real meat of the Mission Statement lies in nouns.  For us, we can boil it down to three words, “Cycling, People, Planet”

Good Luck and let me know how it goes for you!

What is your mission statement? How did you write it? Let us know in the comments.

Email Is The Low-Hanging Fruit Of Marketing

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Email newsletters are a must-have and powerful tool in your retail marketing campaign.

As it becomes more and more clear that traditional advertising is over-rated, over-priced and almost alwasy under-delivers, it becomes a serious challenge to understand how to reach your audience and take control of your own voice. Using email campaigns reaches a perfect balance between modern technology and mass appeal. Everyone has email these days, everyone.

There are some great tools out there that will help you make sense of it all. And you definitely will want to get a tool to help you. No mass emails should be sent out directly from your personal email.

MailChimp is the one I chose and love. Constant Contact and Emma are some other popular ones.

What makes the email newsletter tools so extremely powerful is the ability for you to send many emails and knowing they will reach people’s inboxes. Email server these days increasingly blacklist mass emails automatically.

Here are the steps we took at einmaleins to setup our mailing list.

Capturing Emails, Offline In The Store

At my shop we always have a simple clip board lying on the counter by the register for people can sign up to our newsletter. We don’t have to actively promote it, but often in a conversation with a customer, the topic goes to a new product that might be coming in with the next shipment or an upcoming event, so the clipboard itself becomes a simple invitation and reminder for people to sign up to our newsletter and  to stay tuned in to what’s happening at our store. Every week we get people who sign up, without us doing anything, it’s quite fascinating actually. People want to be on your email newsletter.

This is one of the most low-hanging fruits for marketing imaginable.

Most online services offer a free version up to a certain number of users on your list. And all it takes is a clip board and a simple online tool to help you connect with people and tell them about your product.

It will take a bit to get yourself setup, but this time is well spend and you can fall back on those efforts easy for future newsletters.

Importing your email addresses can be a pain when switching an already existing list, but when starting from scratch it’s easy. One person, one email at the time. (btw, did you know that the official AP style guide just switched the spelling from e-mail to email? Now you know!)

Use A Pre-made Templates

You will be able choose from a variety of templates that will make your newsletter look pretty and often professional.

Stick with simple, especially in the beginning when you are still trying to figure out how you want to use the newsletter. Make sure you put your logo on the top, so people know the email comes from their favorite business.

Tip: Videos and pictures are engaging to send to your customers, but remember that spam catchers can be very sensitive, so overdoing the ‘click-me engagement factor’ could lead to your email being caught in the wrong box and your readers will never see your glorious words. That counts especially with embedded content.

Writing Content

Now, you populated your list, chose your template, now comes the hard part, to create the content.

Depending on your business, always include a clear buying opportunity, you want your customers to know what your selling, what’s new and what’s important. But this is a marketing tool that will reach people in their personal email inboxes, so be smart on how you choose your content. Adding a personal message, highlighting an employee and adding the human touch is fundamentally important in today’s over crowded communication world. You have to stand out, and the only way you can do this, is if you show that you are uniquely human.

Once You Hit Send, You’re Done.

Soon you can come back and check the reports of what happened with your email after you hit sent. Every marketing campaign is looking for ROI, return on investment. The reports that email tools like MailChimp are offering are nothing short of amazing.

  • You see who opened your newsletter, when and how many times.
  • You can see what link people clicked on, how often.
  • Was it an image link, or a text link.

This is all fantastic data, reaching way, way beyond what any traditional marketing campaign could ever offer you.

So, what are you waiting for, become a content creator and reach your customers directly. You will be surpassed by the engagement you will achieve.

A Word Of Caution

Don’t overdo it. Your reaching your customers in their email inboxes and many are overcrowded these days. Send too many emails and you risk the chance of being spammed. Dropped into the abyss of never being seen again.

But, if you fall in love with this electronic engagement with your customers, there is always Facebook and Twitter and we will get to those tools in a future post.

Multiple Locations: A Whole New Game

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We all like to think that we can be everywhere at once, do everything we desire, and not have things fall by the wayside. In reality, we have limited resources with which to enact our schemes and work towards our dreams.

Many of us include multiple locations in our business aspirations, to increase our market reach and leverage economies of scale. Compared to single location operations, opening and managing multiple locations isn’t the next level in the same game. It’s a different game altogether. To succeed, you’ll want to be well prepared before you start playing.

Let’s explore what you should take into consideration as you expand your enterprise into an empire that will inspire fear in the hearts of your enemies and undying devotion in your legions of fanatical followers.

Who?

People are your biggest asset.

Human beings, particularly those with an entrepreneurial spirit, try to channel our inner Jamie Madrox and be everywhere at once. However, sans mutant replication powers, you’ll find that feat quite difficult. In order to succeed with multiple locations, you’ll need to recruit, train, and coordinate with the right people. Finding the right people is key to successfully opening and managing multiple locations.

  • Trust: You’ll want individuals who can work well without you looking over their shoulder. You’ll need trustworthy lieutenants to implement your plans and enhance them with their own unique abilities.
  • Personality: Make sure your personalities mesh. Things will be challenging enough getting the business operating the way you want it without dealing with conflicts unrelated to business. You could have the most qualified applicant in the world all lined up, but if they have unrealistic expectations, a grating personality, and terrible hygiene, you’re better off going with someone who won’t create undue tension within the work environment.
  • Complementary: Get the right people to enhance your own abilities. Find folks who complement your skill sets and bring something new to the table. And most importantly, find people who share your passion and are willing and able to work hard.

What?

Copy the good, discard the broken.

Are you trying to create an exact copy of your existing location? Why? Is your present setup perfect in every way? Chances are it can be improved, so why not use this opportunity of opening a new location to look at what makes your business successful. Duplicate those aspects and improve upon the ones you’re not happy with. There’s no sense in copying failed processes.

Perhaps you’re constrained in your merchandising displays at your current space. Use this opportunity to implement a setup that will break those constraints and enable you to create The Greatest Merchandising Displays Ever! Or you want a private conference room to host a communal lunch for the entire staff every day. The 4’ x 6’ closet in your current location does not serve that purpose well. In that case, look for locations that will provide the space and layout you’re looking for.

You should explore all your operations and figure out what works and what doesn’t. Keep the good, toss the bad, and add even better.

Where?

“The 3 most important things are location, location, and location.”

Where should your new location be? To answer that question, look at your existing customer database and figure out where a new office or store location would generate the greatest return. You want to focus on not only attracting new business, but increasing sales to your existing clients. Do you have a large gap in your customer base from a neighboring market due to a lack of visibility there? Would a location in that area improve your overall sales and profitability?

Always leverage your current stores to tout your new locations. You’ll likely have customers that visit you only infrequently because your existing site.

You’ll have options – a bunch of different markets in your area. You’ll need to weigh the potential costs and benefits of each and then make a choice as to the best one for the next step in expansion. Once you’ve narrowed it down, do an exhaustive search into the best individual locations within that market.

Tips:

  • Define the parameters of your ideal location before you start looking so that you can easily disqualify spaces that don’t fit within those guidelines.
  • Set your budget for the new location so you know what you can afford, in order to avoid wasting time on options outside your price range.

When?

“Timing is everything.”

When should you consider adding a new location?

  • First, you want to make sure everything is running smoothly at your existing operation before expanding. If you can’t successfully manage one location, two is out of the question.
  • Measure and time the market demand for each potential new opening. If you’re in retail, would you be better off opening in October, just before the holiday shopping season, or in August to allow you to build up larger customer awareness heading into the holidays? Could the lead time be less if you’re going into a higher cost location like a mall? Give yourself enough room to plan.

Once you’ve determined your target opening date, begin your serious implementation many months before that. There are a ton of details to sort out and you need to have enough time to get them right. Planning in advance will save you a lot of money, time, and energy on down the road. Make sure you don’t jump the gun or wait too long. Timing is key.

Why?

What are your overall goals?

This is perhaps the biggest question to answer before you expand to multiple locations.

  • Why do you want to expand?
  • What’s the long-term plan?
  • Do you want 2 locations, 6 locations, 52 locations?
  • What’s the outline of your path from here to there?

If you just want to expand for the sake of expanding, without any clear target, you’re undermining your chances at success. You should have a clear mission and goal, just as you should for your overall business.

If your mission statement is to “Sell as many licorice-flavored, flamingo-shaped lollipops as possible,” then your new location should support that goal and have specific sub-goals, such as “By December 31st, 2013, this location will sell 123,567,890 licorice-flavored, flamingo-shaped lollipops.” If you can’t come up with clear targets for your potential new location, don’t open it yet.

If you can’t confidently answer the question “why?” then you should reconsider opening another location altogether. Your locations should all contribute to the overall success of your company; tying their performance to the overarching goals of the organization is crucial.

How?

Do you have what it takes to get things done?

Once you’ve answered all these questions, you need to know how to open a new location. Chances are, if you opened your current location, you can hearken back to those experiences, try to avoid the mistakes you made and replicate the successes.

You’ll need to design an entirely new structure and redesign your operating procedures to make sure they support multiple locations.

  • Use tools like integrated inventory systems to help.
  • Were you doing your own payroll before? You’ll definitely want a payroll service to do that for you now.

Go through that sort of reasoning for every aspect of your operation. You need to find partners who can make your job easier, leveraging their expertise and tools to empower you to grow. You need to be free to manage all the back-end operations and put out fires, rather than being bogged down in day-to-day transactional details.

Don’t forget to plan time for your future expansions, moves, disasters, unexpected opportunities, and optimization of your existing operations.

Having multiple locations can open up a whole new universe of possibilities and benefits, but they are not without their challenges and liabilities. Be sure to be fully cognizant of those before you jump in. And remember, work’s not work if you’re having fun. Embrace your passion and focus that energy on making your life and the lives of those around you better, no matter how many locations you have.

Basic Financial Checklist: How To Calculate Quick Ratio

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Monitoring your business finances and understanding their significance can be the difference between struggling to make it through the end of your lease and discovering what makes your business successful.

If you’re thinking about opening a small retail business or if you’ve been in business but still don’t have a clue what to make of your finances, I will outline a monthly checklist of three steps that I have found to be useful in monitoring my retail business. There are many ratios, calculations, charts and graphs that you could keep track of, but if you’re like most small business owners you do way more than just look at spreadsheets. Depending on what you are selling, you will find other metrics specific to your market niche.

How To Quickly Determine Your Financial Health, 3 Steps:

  1. Reconcile and examine.
  2. Process profits, look at losses.
  3. Quick! What’s your quick ratio?

Step 1: Reconcile your statements and examine your account balances.

Whether you are tracking your accounts on paper, in a spreadsheet, or in an accounting software like Quickbooks, the first task in a financial checkup is to reconcile your accounts. Make sure that you and your bank agree on what you purchased and deposited.

In addition to any checking or credit card accounts, it’s good practice to reconcile your liabilities: lines of credit, loans, and accounts payable (what you owe your vendors).

After reconciling your accounts, look at your ending balances. If you have an accounting software, you can pull up a balance sheet report.  The balance sheet basically tells you the balance of your accounts: your assets (what you own including your inventory and moneys owed to you) and your liabilities (what you owe to others).

Are your account balances more or less than the previous month? Hopefully, your cash balance is growing, but if it’s not, why not? Maybe sales were down last month or perhaps you paid off a vendor.  It’s not necessarily a bad thing to owe more to a vendor – perhaps you purchased more inventory for the holidays.

The important part here is to stay on top of your accounts, so that you understand what is happening financially in your business.

Step 2: Profit and Loss

The Profit and Loss statement (or P&L statement) sounds official and like it needs a PhD in finance to understand, but the numbers are simple.  This report tells you how much you’ve taken in sales and how much you’ve spent on cost of goods sold and expenses.  Ideally, of course, you want to bring in more than you spend, but some businesses are seasonal. In my bike shop, for example, we have some rainy and cold months where we’re barely breaking even (if that).  Then when summer rolls around our monthly report looks great.

Look for any changes in revenues and outflows:

  • Did you spend more for your utilities this month?
  • Did you have a bump in sales?
  • Is your payroll creeping up because employees are working overtime?

Tracking changes in your revenues and expenses will help understand the inflows and outflows that make your business viable.

IMPORTANT CAVEAT: You can be a profitable sinking ship! You can have a profit and loss report that shows that you are making money each month, while your cash reserves are dwindling. This seems counterintuitive, but consider this scenario: You open your business and business is booming, products are flying off the shelves, and you can’t make it to the bank fast enough with your daily deposit. Buoyed by your success, you start purchasing more inventory, purchasing more costly product lines. You make some capital improvements to your building.  Capital and inventory purchases don’t show up on your P&L statement, at least initially, but cash is being spent.

Speaking From Experience…

This same situation happened to my business in 2008.  We opened just before the gas price boom and cycling craze of ’08.  Without knowing what we were getting into we rapidly scaled up our inventory and staff to keep up with the demand. The profits looked great. Then came October. Gas prices fell, cool weather settled in, and we had more inventory and staff than we could afford. Within a matter of weeks we went from boom to barely hanging on.

What could we have done differently? Many things, but one simple calculation could have helped us make better decisions.

Step 3: Quick! What’s your quick ratio?

Add up your assets (cash, accounts receivable, deposits, etc); leave out your inventory.  Divide this number by your liabilities. That’s your quick ratio, also known as the acid test.

Here’s an example. Let’s say you have:
$9000 in the bank account
$3000 in receivables (money that your customers owe you)

That’s $12000 in assets not including your inventory

You also owe:
$2000 in credit cards
$9000 in a bank line of credit
$4000 to vendors

You have $15000 in liabilities.

Here you have a quick ratio of 12000/15000 = 0.8.

The closer your quick ratio is to 1 the better: The quick ratio is simply a measure of your ability to pay off your debts with money you can easily access.  In other words, if sales dropped you would still be able to pay your debts? A quick ratio of 1 means that for every $1 you owe, you have $1 in savings. This is obviously ideal, but for most small retailers highly unlikely.

My stress levels correlate strongly with my business’ quick ratio. When I see this metric going down, I’m losing sleep.  When it’s stable, I can at least sleep.  I like the quick ratio because it reveals the financial strength of the business.

Back To My Story…

In 2008, if I had been looking at our quick ratio then, I could have seen that we were already overextended when we started bringing on more products and employees.  We might have missed a few customers for whom we didn’t have the right product (but that will always be the case), but we would not have ended up with our backs against a wall with piles of inventory, vendors to pay, and no cash to pay them.

I suspect that many small retail owners have more passion for their products and their customers than they have in financial background. It’s this passion that will propel your business, but knowing what is happening financially is critical for channelling that passion towards a profitable venture. Your relationship with your business’ finances doesn’t and shouldn’t stop there, but these steps will get you started on the right track for understanding your small retail business.

What Checklists or Calculations Do You Use?

We’d love to hear what you use to check on the health of your retail business. Leave a comment below. Or if something in this post wasn’t clear or you have a question please leave it below and we’ll do our best to answer. Thanks!