Challenging Business

As with so many things in life, answer to every problem is closer at hand than you think. As retailers feel the pain of an economic slowdown and flagging consumer confidence, they tend to look outside their business for remedies and strategies. However, they would do better to look inside the business, measuring its performance and planning its future using intelligence that is readily available.

An effective business management relies on good information. It goes without saying that retailers need to monitor their exposure to risks, their cash flow and their profitability. However, the most valuable information often does not sit in the P & L accounts; it derives from measuring critical indicators. These indicators are as individual to the business as its DNA.

A reliable approach is to define simple indicators that proactively take the temperature of a business. For an online retailer, indicators could be based upon visitor traffic by time of days and duration, highlighting the pages that visited and the products that provoke enquiries and generate sales. A stores-based retailer could measure footfall, by location, by time of day and by length of visit. Every business is affected by scores of internal and external factors that may enhance or diminish its performance. The sheer volume of information available can be distracting so it's very important to focus on just a few key indicators which reflect performance, are measurable, are comparable against benchmarks such as a previous year's data or a competitor's results, and which indicate a different course of action.

How do you identify your KPIs? Whilst best practice suggests that you ask yourself three questions: what drives your sales figures, your costs and your cash-flow, you should always come back to what drives your own business. Whilst there are retail constants such as sales per square foot of store space, accept that drivers can vary enormously even within the same sector, and that they will need to change with time.
Analyse what would enable you to outperform your competitors and consider having these elements as KPIs. First Understand the costs of each step in your supply chain. Second, Investigate the effect that training and staff turnover have on your sales, and Third, measure productivity by sales person against experience and length of service. A Good stock management means having the right stock available at the right time in the right location. It also enables you to release cash by "turning" stock.

Remember onething that measuring sales performance will not help you to make sales. Understanding and acting upon the key indicators of your business is the best route to success. Only KPIs will enable you to judge whether your business is in poor or good health, and will direct you to apply the appropriate treatment at the right time.

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