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Last updateTue, 30 Jun 2015 12pm

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The importance of a solid budget

Don’t let your eyes glaze over – I know this topic isn’t high on the list of priorities of many jewelers, but just because it’s not enjoyable doesn’t mean it’s not necessary. I don’t like taking the rubbish out, but I’d hate to think what my house would be like if I didn’t!

Make money from your repairs

Repairs often suffer as the ugly sister of many jewelry businesses. Compared to the more glamorous gold and silver departments, many stores leave repairs to take care of themselves. Yet your repair business can be one of the most lucrative areas in any store, and provide you with a consistency of profit that is the envy of other items.

It’s time you got Lazy

Many of you will be familiar with the 4 quadrants style of management that has developed in the last twenty years or so. In this process it often talks about the 4 types of problems that a business has to deal with each day. They can generally be broken down into 4 categories:

  1. The urgent and unimportant
  2. The non urgent and unimportant
  3. The urgent and important
  4. The non urgent and important

We’ve found over the years that the most successful jewelers have been the one’s who have the greatest ability to avoid being caught up in the urgent but unimportant, and are able to concentrate their time in the non urgent and important.

Let’s give you an example of each type.

  1. Mrs. Smith brings in her watch for a battery and insists on speaking with the owner about getting a new strap fitted while it is being done.
  2. The marketing plan for the next 12 months needs to be completed.
  3. More rubbish bags are needed as you are down to the last three.
  4. The pricing tickets need to be completed for the sale starting tomorrow.

So how did you do matching them up? The urgent tasks are obviously Mrs. Smith and the sale tickets, but it would be fair to say that Mrs. Smith may fit into the category of unimportant (not to Mrs. Smith of course, but if you weren’t there to help her I’m sure she would be quite happy to deal with one of the staff) with the sales tickets being urgent and important.

The non urgent tasks are the rubbish bags (which are not important) and the marketing plan.

It’s at this point where many jewelers fall into a trap. Understandably every store wants to offer that personal service for their customers, that is the point of difference that the chains don’t offer. However, you need to do it in a way that you don’t finish up at your customers beck and call. Mrs. Smith’s strap is important; but not as important to you as getting your marketing plan prepared. It’s important you offer that special service to Mrs. Smith, but you must not compromise your business in the process – if you went out every time a Mrs. Smith asks to have her strap changed you would never get anything else done.

The urgent tasks, by their very urgency, tend to draw attention to themselves. The non urgent and unimportant are either not critical, or eventually become urgent and are dealt with. The great shame is the non urgent but important tasks that get left – such as preparing a marketing plan for the coming 12 months. The consequences of not completing these types of tasks are, on the surface, minimal, however their long term impact can often go unnoticed. Much like the frog that slowly boils to death when the heat gets turned up, these important areas can be neglected until it is too late.

Although these four types of tasks have been a relatively recent addition to management theory, the principles have been around for many years. The German Army over 100 years ago, used to divide it’s officers into 4 different types.

  1. The hard working and incompetent
  2. The lazy and incompetent
  3. The hard working and competent
  4. The lazy and competent

The first category were the most frightening and were effectively isolated. Their incompetence could result in loss of life, but because of their hard working nature they had the ability to cause even greater havoc than the lazy officer.

So which category did they prefer to promote? The German army sought to identify and promote the lazy and competent officer. They saw the laziness as a virtue as they realized a lazy yet competent officer would not waste time on matters that were of no consequence. These types of people had the ability to pinpoint the areas that got them the greatest results for the least effort – and they would conserve resources better as a result.

So take a lesson from the military handbook. Start practicing being lazy and force yourself to only work on those areas that will bring you the greatest results – the important but non urgent.

David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact Carol Druan at This email address is being protected from spambots. You need JavaScript enabled to view it. or 877-569-8657.

How are you handling the gold price?

With gold having shot through the $1500 mark at the time of writing, jewelers are increasingly finding the cost of replacing sold product to be a changing game. This month I will discuss the “new gold standard” and how best to deal with this when replacing product.

Profit vs Cash flow - what’s the big deal?

If you are running a business, you better know there is a big difference between profit and cash-flow. Though they seem similar, they are not, and you run the risk of putting your company in dire straits if you can’t tell them apart.

Much as I don’t want to hit you with a lot of accounting speak, there will be some, but I promise I will try and keep it to a minimum!

Let’s start with a simple analogy... say an $800 weekly household budget. Included are likely to be allocations for groceries, cleaning and other similar stuff needed to run your household, plus, that which is needed for utility, telephone and other such expenses.

Suppose you lump the money together and spend as you would without apportioning the amounts. A little extra here and an indulgence there and you are likely to end up overspending on the other household stuff with little left over at the end of the month to pay the electricity, heating and other bills which are due.

This exact scenario can easily play out in your business if you are just as lax. The language used may be different, but the conclusions are the same. If anything, it is riskier as the sums involved are much greater.

So, moving into business mode, and with the help of some terms, we present a similar scenario with a company that has made gross sales earnings of $100,000. The 2 perspectives are presented in the chart for a comparison of how they may play out.

Example 1 (below) shows how the company might allocate and spend the money earned according to standard accounting rules, and which results in a Net Profit of $1,715.

In actual fact however, Example 2 is what has happened in terms of cash flow. Instead of a profit, there is a gaping $13,285 shortfall, which may well require the company to opt for overdraft facilities.

Brown-May

* On average, US jewelry stores break even or lose money 9 months of the year.

** In the US, store annual net profits of 0.9% to 12% are the norm, thus a $500k store will take in $4,500 to $60,000 per year.

Jewelry retailing is especially vulnerable to these sort of situations as it is a cash-based business with settlements not due until 30, 60 or even 90 days later.

The keys to avoid becoming stuck in such business dilemmas is to maintain cash flow projections and to segregate and allocate. This is done by staying ahead of your cash flow requirements and separating the inflows from the get go, into two piles – one for stock and the other for expenses. Knowing what you need to pay for before you go spending on unbudgeted items is half the battle. In other words, plan, plan and plan your expenditure!

By doing so, you will be on top of your profits and cash flow, have a lot less money angst and a lot more cash in the bank for your well-earned creature comforts.

David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact Carol Druan at This email address is being protected from spambots. You need JavaScript enabled to view it. or phone toll free 877-569-8657.

The true cost of aged inventory

One of the biggest headaches for most retail jewelers is the issue of surplus inventory and what to do with it. In many cases the majority of this product has become old, and the problem gets compounded by the need to keep adding fresh product – of which around 80% eventually joins the old category as well. Many jewelers see this as an excess inventory problem – in most cases however, I prefer to attack it from the point of view that there is a shortage of sales.

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