I recently wrote about the experience I gain and the lessons that I learned when rescuing my family’s ailing store in Auckley near Doncaster. The experiences that my wife and I lived through first stabilising then growing the business have stuck with me. So apart from Breakeven, Cash Flow and tight stock management I also learnt that any investment must bring a return and apart from major capital, projects need to be funded from the business’s own resources.
I am currently looking at the benefits of fitting doors to our chilled display cabinets because of the perceived environmental benefits. I am aware of claims that there can be a 40% reduction in power usage by fitting doors, but as our investment will cost several £1000 I need to full understand what benefit we will gain. My investigation has been into the types of installations where this level of saving has been delivered and my research suggests that the 40% level of saving is in stores where new compressors and doors have been fitted.
As my compressors are of a modern energy efficient type the benefit for me is likely to be less and therefore the return on the capital employed to buy and fit the doors will be less. Rather than rush into spending the money and being disappointed later on I have taken my investigation on to look for a store with a similar modern chilled display as mine who has installed doors. I have found one that fits the bill and the owner is keeping me informed about the changes in his energy use. While I may think that the idea of retro-fitting doors to our chilled display I need to fully understand the financial case before I can sanction the purchase.
It is taking a methodical approach to the finances in my business that have allowed my wife and I to grow the profitability of our store every year and that has enabled us to regularly invest in it with confidence. The basics are important and my Sunday mornings ensure that I have time to stay up to date with record keeping.
Here is my check list:
- Profit and Loss Forecast: Are our weekly sales and cost in line with or better than our budget?
- Cash Flow: Keep a record of when payments are due. For Tax, VAT and other occasional expenses we have an instant access savings account that I transfer an amount each week into the account based on expected Tax and VAT, a rising turnover is likely to require a larger amount to be set aside.
- Stock taking anomalies: I always investigate variances to discover if they are a simple error or we are losing stock. Undertaking this simple process has reduced loses.
- Store profitability by category: A correctly set up EPoS database can provide a vast amount of valuable information if you look at it. I find that the key data set is sales by profit. Understanding how much profit each category or bay is generating allows me to consider how we can make changes to the store layout to improve our overall gross profit. When we make changes the historic data that I keep enables me to see if the changes have been beneficial.