Book Description
- Beat the big-box retailers - Provide outstanding customer service - Use technology to your advantage


From the Publisher
Now includes a bonus CD-ROM with marketing and business tools to help you get your new company started successfully!


From the Back Cover
Sart & Run a Retail Business recognizes that the retail industry has undergone enormous changes in the past 30 years. Retailing experts Jim Dion and Ted Topping give clear instructions and knowledgeable advice on how an owner-operated retail business needs to be organized to survive and prosper in today’s highly competitive retail environment. A succinct and valuable guide, this book is as useful to retailers with established businesses as it is to those who are just beginning a retail business plan. Drawing on their years of experience in the retail industry, the authors provide a detailed, practical job description of the successful retailer, covering -- - Retail basics - Merchandising - Buying - Personnel - Sales management - Technology - Customer service


About the Author
Jim Dion, PhD, has been involved in all levels of retail — as a buyer, brand manager, and department store executive VP. He is also a popular retail workshop leader throughout North America. Ted Topping, MBA, has worked as a retailer on both a local and national level. Currently a consultant, he has produced and led highly successful workshops for companies and retail trade associations.


Excerpted from Start and Run a Profitable Retail Business (Start & Run A...) by Jim Dion, Ted Topping. Copyright © 2000. Reprinted by permission. All rights reserved.
CHAPTER ONE The basics of retail The basic premise of the retail business is simple you buy an item at wholesale and sell it for more than you paid for it. Unfortunately, the things in life that seem simple are often very challenging, and there is much more to retail than that. To be successful in retail, you need to have the right item, in the right place, at the right time, in the right quantity, at the right price, with the right service. We do not take credit for inventing the six rights of retail. They have challenged retailers for years, defining the business and demonstrating just how much more there is to retail than selling an item for more than you paid for it. To start, you need to sell it with enough gross profit to pay all of your expenses and leave a net profit at the end to compensate you for your investment and your work. Like it or not, the retail business is based largely on mathematics. You can build a beautiful store, stock it with wonderful products, and staff it with great sales associates, but if you do not run a profitable retail business, you will go bankrupt and lose everything. We believe that you should spend at least six months crunching numbers to see if you can make your business work on paper. This may seem extreme, but if you rush through the process, you could be dooming yourself to failure. The following is a retail income statement in its most basic form. It could describe your business as it will look three years from now: Net sales $400,000 Cost of goods sold 220,000 Gross profit 180,000 Expenses 170,000 Net profit $ 10,000 The top line shows net sales, the total amount that you received from customers. You subtract from that the cost of goods sold, the total amount you paid to buy the merchandise that customers bought from you, including any freight costs. This gives your gross profit, also called your maintained margin. From that gross profit figure, you subtract all of your expenses, known in retail as selling, general, and administration (SG&A), and you are left with your net profit, the total amount remaining at the end of the year. Hopefully, this is a positive number. By separating the expenses into various standard categories and calculating the percentage of net sales that each category represents, you produce a profit and loss statement that tells you more about the operation of your business. Sample #1 shows a typical profit and loss statement. If you are not familiar with the retail business, the net profit figure in this sample may come as a surprise. Like many people, you may have had a vague notion that retailers simply double the wholesale price of an item and pocket the difference. In reality, this sample profit and loss statement is quite typical of the retail business today. For running a $400,000 business, this owner-operated retailer made a net profit of only $10,000, or 2% of sales. If you look closely at the figures in Sample #1, you will notice that some expenses are fixed. For example, the cost of utilities would not change if the store did $300,000 in sales rather than $400,000, or $500,000 rather than $400,000. Other expenses are not fixed, but neither do they vary by the same percentage in either direction as the sales figures change. For example, the cost of supplies would change if sales decreased or increased by 25%, but the change would be less than 25%. By examining these expenses carefully, you can determine the breakeven sales figure for the business. This is the amount of sales needed to cover the expenses incurred in running the business. It does not include the cost of goods sold. After your first full year of operation, this is a number that your accountant will be able to calculate easily. Until then, you will need to use an estimate. Sample #2 shows three profit and loss scenarios, indicating how expenses can vary with sales. A careful examination of these scenarios should help you understand the ways that expenses can vary with sales. They also illustrate three very important realities of the retail business. First, you need a certain amount in sales just to cover your expenses and make a profit. We have no idea what the breakeven point will be for your particular business, but we do know that calculating and understanding this figure will be critical to your success. Second, once you get past the breakeven point, sales increases affect the net profit line at an increasing rate. In Sample #2, a 25% increase in sales from $400,000 to $500,000 resulted in a 240% increase in net profit. Third, the secret to running a profitable retail business lies in controlling your expenses. A significant difference between the retail business today and the retail business operating 30 years ago is that it was much easier for retailers to increase their gross profits back then. When they received new merchandise, they simply attached a higher price to it and customers paid whatever they asked. When there was little competition, that method worked. However, customers today are very price-sensitive. A favorite question is, "When is this going on sale?" In an electronic marketplace where your customers will soon be able to check prices by talking to their TV sets, you will not be able to increase your prices at random in an attempt to increase your gross profit. Neither will you be able to significantly reduce your cost of goods sold. As an owner-operated retailer, it is unlikely that you will have the upper hand in negotiations with your suppliers or be able to drive prices down by buying larger quantities....