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From Home Furnishing Business

Are Those Storm Clouds?

By Bob George

Editor's Note

This letter is addressed to those retailers who work on their business instead of those who work in their business.  That is not to say that the former retailers do not work, but their focus is on how to improve their performance.

The constant drive for fractional improvement leads to the bottom line, thus achieving the statistics illustrated by the top quartile performance in the feature of this issue.  The drive to achieve this level of performance involves every week comparing historical week-over-week as well as that of the previous week.   Unlike other non-durable consumer retail, each week it’s “game on” to entice the reluctant consumers into the store.  It is like a bicycle – if you stop peddling, it falls over.

As a backdrop to this focus is the noise.  The current environment of the economy that is causing consumers to postpone the purchase and other retail models that threaten to capture some of the market share are two of the nagging doubts.  There is nothing that will eliminate those nagging concerns.  However, having a contingency plan to handle those things that can happen is a beginning.  The starting point is a detailed breakeven analysis dividing your expenses into fixed and variable or a combination of both.  This is a good exercise.  Illustrated to the side is a breakeven analysis for the all-industry model.  The result is that an average furniture retailer would withstand a 13% decline and still break even.

What is your breakeven?  Commit yourself to improving every variable line item to accepted performance.  Consider every fixed expense item for potential cuts.  Make your contingency plan to address.  If your top line decreases by 5%, 10%, 15%, put it in a sealed envelope.  Now relax and return to your daily focus of improving performance, knowing that you have a plan.  If necessary, executing a plan will be tough enough without having to develop the plan in crisis.

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