In specialist organic trade as well, strategic controlling is indispensable. With the right performance figures, mistakes can be recognized quickly and things can be put on the right track in time.
Expanding organic chain stores and conventional retailers who are increasingly listing specialist products – competition in the organic market has become tougher. For owners of small specialist shops, an honest self-analysis is therefore becoming increasingly important. Nevertheless, many independent retailers only evaluate a small amount of data – a mistake, because the recording of key figures is essential for planning and controlling successful business, setting goals and monitoring them.
Measuring success and need for action
Controlling is also an important instrument in the medium-sized specialist trade for making processes within the company transparent. On the basis of a regular target/actual comparison, an “early warning system” is created, in case key figures develop in an unusual way. The entrepreneur can then take countermeasures in good time.
The most important company key figures across all industries are sales, cost of goods sold, gross profit, margin, cash flow, liquidity, write-off, operating result and profit. In the food trade, the procurement of goods (cost of goods) represents by far the largest cost block. The gross margin is one of the most important measures of success. It expresses the difference between retail price and cost price in relation to the retail price. If the purchase price increases while the retail price remains the same, the gross margin decreases and vice versa.
In addition to the financial indicators, there are a whole range of operational indicators that depict the success and development of a retail company, such as sales density, customer frequency, average receipt or out-of-stock ratio. The informative value of each key figure increases with comparisons of time series and between companies. Therefore, a sporadic survey is of little help to the retailer.
Identifying opportunities and risks early on
The success of a company is based on steady sales growth. The retailer can only verify this, if he knows the exact sales figures from previous years as well as the current ones. If he finds deviations, he can initiate actions or advertising in time to boost sales.
However, a detailed evaluation of key figures not only shows the development compared to previous years, but also shows economic leeway. If the retailer compares previous and foreseeable revenues, he can calculate different scenarios for a realistic assessment of planned investments and for avoiding liquidity shortages. A company can define a whole flood of key figures. However, which key figure is really important is an individual management decision and depends on various factors.
Setting sales prices correctly
The evaluation of sales and margins on the basis of merchandise or article groups helps, for example, with the correct price calculation. It shows retailers the merchandise categories in which they are actually earning money, or the share of the total revenue generated by individual assortments. Merchandise category analysis with the benchmarks of similar companies is even more informative. Another simple but important key figure is the number of sales, i.e. sales over time. Only those who know in which period of time a particularly large number of articles is purchased can adjust personnel planning accordingly and avoid idle times as well as bottlenecks.
One morning per month is enough
The monitoring of key figures is more than just a tiresome duty, even in the organic food trade. It should be an integral part of the everyday life of the entrepreneur. Only retailers who know their figures know whether they are successful in the long term, whether they have been able to increase their profits, whether their marketing is working or whether their customers are satisfied. They are also measured by them, for example at the bank when it comes to a new loan.
Even independent retailers who are very busy in their day-to-day business should therefore take the time to look at their figures regularly. With a good accounting or controlling tool that prepares the most important key figures in a transparent way, the time required is manageable at around one working day per month. It is best for traders to arrange a monthly appointment with themselves to compare the actual figures with the planned figures established at the beginning of the year.