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Drowning in Data? The Only 3 Retail Numbers That Matter · The Resilient Retail Game Plan - retail insights, retail trends and best practices

• 0:00
  This episode comes with a companion free download.
• 0:03
  If you head over to resilientretailclub.com/numbers,
• 0:06
  you'll get the guide to the three key numbers you need to know in your
• 0:09
  business and how to calculate them.
• 0:12
  Have you ever opened up your Shopify dashboard looking for one answer and
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  somehow ending up with 10 new questions?
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  Retailers don't have a lack of data problem.
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  If anything, they have the opposite.
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  They are drowning in information but starving for clarity.
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  I've worked with retailers who have dashboards, apps, reports, spreadsheets,
• 0:35
  and notifications everywhere letting them know every single time they make
• 0:38
  a sale, yet they still can't answer some very basic questions like, "Am
• 0:43
  I making money?" "Am I on track?"
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  and "Is my stock healthy?" Today, I want to talk about cutting through
• 0:49
  the noise and focusing on the handful of numbers that actually tell you
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  whether your business is healthy
• 1:09
  Many business owners think that the solution is another app, another
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  report, another dashboard, and certainly we are all being sold
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  more AI tools every single day.
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  But the reality is that more information doesn't automatically
• 1:24
  lead to better decisions.
• 1:25
  In fact, too many viewpoints can actually make decision-making harder.
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  One of the things that I quite often see is founders who are
• 1:34
  bamboozled by an excess of data.
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  They have got different tools that are telling them different things,
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  and the big question that's in their mind is really, "So what?
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  So now I know all of this information, I can see all of these different things,
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  all of these different elements, and ultimately, I still don't know whether
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  or not I'm actually making any money." They might be looking at Shopify reports,
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  Google Analytics, Klaviyo reports, Meta Ad reporting, accounting software.
• 2:03
  They might be running third-party analytic tools, for example, endless
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  spreadsheets, looking at heat maps of their website, or getting notifications
• 2:12
  or insights from all of the different tools that have added AI into it, and
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  again, still not really sure what to be actually doing with it, and which
• 2:21
  numbers they should be focusing on most.
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  Many people will ask me, "When it comes to the… doing an end of month review
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  or an end of quarter review, what should I actually be looking at?" And the
• 2:34
  goal here, really, I believe, is not to try and collect more information.
• 2:39
  The goal is really to try and gain some clarity.
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  The first thing that I would suggest that you do is to actually simplify the amount
• 2:48
  of tools and tech that you are using.
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  There's such a thing as tech creep, where you sign up for something, and then all
• 2:54
  of a sudden you've actually paid for all of these different tools, these plugins,
• 2:59
  these apps, and you might not even be using them, or you may be looking at them,
• 3:03
  but still not really having your answers.
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  So I definitely recommend doing a bit of housekeeping.
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  If you have a tool or any piece of tool or software that you are using, then ev-
• 3:15
  for every single one that you're paying for, I would suggest
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  that you ask the following: "Is this giving me information that I can't get
• 3:22
  elsewhere? Am I actually looking at it regularly? And am I doing anything with
• 3:28
  the information that it's providing?"
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  So those three questions will help steer you and help you look through.
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  If you've forgotten which ones you've signed up for, which no, uh,
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  judgment from me, I, I think it happens to all of us, definitely take a look and
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  run through all of your direct debits or your recurring payments in your business
• 3:47
  bank and just ask yourself, "What is this?
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  Am I paying for it?
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  What do I even need it for?" Because, as I said, the danger is that too much
• 3:57
  information can just cause overwhelm, and if you're not really using it, um,
• 4:01
  it could just be adding to the noise.
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  The truth is that although we are being bombarded all the time by AI and
• 4:06
  it can feel really overwhelming, it does also create some real opportunities.
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  So for example, Shopify Sidekick is a great AI tool that is allowing
• 4:15
  people to actually ask using what they call natural language reporting.
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  So natural language reporting basically means that you can ask it
• 4:24
  a question in a conversational way.
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  Prior to Sidekick coming in and having these capabilities, you would've had
• 4:31
  to, if you wanted to know what your best sellers were, you would've had
• 4:33
  to run your sales by product picked the time period that you wanted, and
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  basically run the report and then saved it in the version that you wanted it,
• 4:43
  made sure it was showing you all the bits and pieces of information that
• 4:46
  you wanted, and then saved that report.
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  They actually, even before that, Shopify, they had very fixed reports
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  that you couldn't really amend.
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  They then changed it last year to be much more flexible, but
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  maybe slightly harder to use.
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  But now with Sidekick, you can actually just go in and ask the AI Sidekick,
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  "What were my best sellers last month?
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  What was my sales margin last month?
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  Which products are underperforming?" So instead of building complex reports
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  where you have to get a lot of different pieces of information, you can now
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  actually use Sidekick or other AI tools for, as I said, that natural language,
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  so you can have a conversation with it, ask it the questions you might
• 5:25
  otherwise have had to answer yourself.
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  So this also means that if even in the last six months things have changed,
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  there may be tools and subscriptions that you'd signed up for last year that now
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  they're duplicative of some of the AI capabilities within the tools that you're
• 5:43
  already using on a day-to-day basis.
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  So again, I would really recommend that you run through and have a look at what
• 5:49
  you're paying for and make sure that even in the last six months, has this changed?
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  Has it shifted?
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  Is this something that you still need?
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  Because a lot of these capabilities have replaced the need for more specific tools.
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  Are there any that you could cancel tomorrow without it changing or
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  affecting your decision-making?
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  So in terms of what you actually need, I've certainly seen people running their
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  businesses off their accounting software, their POS system, whether that's Shopify
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  or something else, and a spreadsheet, which I'll come onto more later.
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  So it doesn't always have to be complicated and fancy for
• 6:25
  you to understand all of the information in your business.
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  In fact, I would say the bigger issue tends to be not that you don't have the
• 6:31
  right tool for the reporting, but that the data that's in your system is not as
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  detailed as it could be to start off with.
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  So moving onto then, what questions are we actually asking to try and
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  define the health of your store?
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  The first question that I recommend that you ask yourself on a regular
• 6:48
  basis is, am I making enough money every time I make a sale?
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  In other words, it's not always about revenue, it's about your profit.
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  Your sales margin, the difference between what you buy something for
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  and what you sell it for, is the absolute foundation of your business.
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  It's the engine, the profit engine, that drives everything else.
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  Everything else that you pay for in your business has to be covered by
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  the difference between what you buy something for and what you sell it for.
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  So you need to understand your monthly sales margin.
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  This is one of the most important numbers for you to look at.
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  So your monthly sales margin is expressed as a percentage.
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  So for example, if you are VAT registered and you sell something
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  for £12, if you take the VAT off, then that's £10 excluding VAT.
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  If you're paying £5 for that, then you are paying £5 and you have £5 profit.
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  So that is five divided by 10 your price without tax, and that is a 50% margin.
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  So you want to be really clear on what that looks like for your whole business.
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  And the way that you would do that is you would look in your… You would
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  look at the sales that you took in the last month without tax, and you
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  would take off all of the product costs associated with those sales.
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  Now, there are various different ways of doing this.
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  If you have got all of your cost prices loaded into Shopify, for example, if
• 8:12
  you're using Shopify, you are able to ask the sidekick, "Tell me what my
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  sales margin was last month," and it should give you an accurate answer.
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  For some people, it will be a question of looking at their sales in their accounting
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  software and then comparing that to the COGS, or the cost of goods sold.
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  Now, the only issue with that is that depending on the way that your
• 8:30
  accounting software is set up, the cost of goods sold that you're seeing may not
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  actually reflect the cost of goods sold for the products you sold in that month.
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  It may just be that you spent more money on stock that month, and therefore, your
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  margin ends up looking a little funny.
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  So if you're not sure how that cost of goods sold is calculated,
• 8:46
  check that with your accountant.
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  But for many people, the best place for them to get this number is to
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  make sure that they've put all of their cost prices into their point of
• 8:56
  sale system, and then they are able to query the total sales that they
• 9:00
  took minus the cost of those sales.
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  And that is a very, very important number for you to have a handle on.
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  Because if your margin is deteriorating or it's, you're not really getting what
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  you want in terms of margin, then your business becomes harder and harder to run.
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  So what do you do if it's not very high?
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  Well, first off, for most businesses that buy in stock from other people,
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  you would expect your, your sales margin each month to be around 50%.
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  So that's what, your, your kind of starting point.
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  Now, if it's not a 50%, it could be eroded by things like discounts,
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  promotions, clearance activities.
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  Sometimes that's just the way it is.
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  If you're running a big sale, you're likely to end up in a situation where your
• 9:41
  sales margin is lower than 50% that month.
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  It could also be that your supplier costs have gone up and you have not increased
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  your prices accordingly, and therefore, your margin is getting squeezed.
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  It's okay for your margin to dip temporarily.
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  You may have one month of the year where you really push into sales that
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  your margin is lower than normal.
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  But what's not good is if it is continually looking low and you're
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  not doing anything to address it.
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  So make yourself check it once a month.
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  If you don't have all your cost prices in, yes, it is a, an admin
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  job to get them all loaded in, but it will bear a lot of fruit.
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  It will really help you understand a lot more about your business.
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  And make sure that you're checking your sales margin once a month.
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  Is it stable?
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  Is it improving?
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  Or is it declining?
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  So you wanna make sure that you're checking that.
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  And again, you wanna make sure that you're doing things to
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  try and improve your margin.
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  So for example, reviewing your pricing or reviewing how many discounts that
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  you're giving out or reviewing how much of your sales, how many of your
• 10:46
  sales are actually coming from full price sales versus sales on a discount.
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  And all of those things will help you keep an eye on that sales margin.
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  But that, for me, is the number one number that you should be looking
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  at each month in your business
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  The second question that I would recommend that you ask yourself is are
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  you selling enough to cover your costs?
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  This is known as a breakeven analysis, and it's one of the most
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  underutilised or underrated numbers in retail.
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  Your breakeven point basically tells you how much profit you
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  need to cover your fixed costs.
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  We do this with every client that we have.
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  When we work with clients in Stock Doctor and Retail by Design, we ask people to complete this
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  breakeven analysis, and we review it because it is so illustrative in terms
• 11:34
  of what's going on in the business.
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  It helps us understand is the business profitable, is the business… Or
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  what number does the business need to be at to be profitable?
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  And it answers a lot of questions.
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  So if you've been feeling unsure about how things are going in
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  your business, then do definitely check out your breakeven number.
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  In my book, Tame Your Tiger: How to Stop Your Product Business Eating You Alive, I
• 11:57
  go into detail in how to calculate this.
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  But effectively, what it's doing is it's looking at based on an average
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  monthly sales, and your average monthly costs, and your average monthly
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  profit margin, are you making enough sales to cover your fixed costs?
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  So without your breakeven analysis, you don't necessarily have a really clear
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  idea of what your sales need to be.
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  Sales can feel a bit random.
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  So if you have a 10,000 pound sales month, is that good, is that
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  fantastic, or is it really terrible?
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  The other thing I will say is that sometimes when I'm working with a
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  client, we'll run the breakeven analysis.
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  Well, this happens fairly commonly.
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  And actually, the business is nicely profitable.
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  There's a nice buffer, and it should really be something that feels
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  quite comfortable for the owner.
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  But what they are doing is they're actually not recognising that the
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  business is quite comfortably profitable.
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  They're still really stressing because they don't have that visibility.
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  They don't know that they definitely have got all of their
• 12:54
  costs covered by the sales.
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  So without your breakeven, you don't know whether you're on track.
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  You don't know whether you're falling short.
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  And you also can't really see if any new costs that you want
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  to bring in are affordable.
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  So for example, one of my favourite uses for a breakeven analysis is
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  when we're able to say, "Okay.
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  Well, I want to bring in extra cost.
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  I want to bring in this person to help with the business.
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  I want to start paying for advertising this way." And without
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  the breakeven analysis, we can't see what the sales increase needs to
• 13:26
  be to justify that additional cost.
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  So having it set up is really, really helpful.
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  And then once a month you can have a look and see how does that
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  compare to what I actually did.
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  Did I do the sales that I needed to do?
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  Was my profit margin where it needed to be?
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  And have, how much have I actually spent compared to what
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  I think my average costs are?
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  And therefore, am I working towards a profitable business model or not?
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  Profit and loss statements exist.
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  Profit and loss is something that you can also look at on a month-by-month
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  basis inside your accounting software.
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  This will give you somewhat of a similar idea whether or not you made
• 14:03
  a profit or loss.
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  Again, the only thing that gets a bit tricky with your profit and loss inside
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  your accounting software is when you have big fluctuations in when you're
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  spending money on stock, and that can throw it off and make it hard for
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  you to understand whether the fundamental business model is profitable or not.
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  So therefore, the breakeven analysis, which assumes a sort of even amount
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  of stock purchase throughout the year, which I know is not realistic,
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  but it's a good diagnostic tool.
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  That is a slightly different thing than a profit and loss statement, and it can
• 14:34
  help you understand fundamentally if the framework of the business is healthy.
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  And then the third question that I would recommend that you ask
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  yourself on a regular basis is, is your stock turning fast enough?
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  So this, for me, is one of the most important numbers
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  that you need to look at.
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  And again, if you're not currently keeping records of your stock, then
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  I highly recommend that you start because it makes it so much easier
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  for you to keep an eye on this.
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  So stock is cash.
• 15:03
  Cash is stock.
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  If you think about every product in your business as a 10 pound note, if it's a
• 15:08
  10 pound product, think of it as a 10 pound note, you can really clearly see
• 15:12
  where the money is in your business.
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  And the longer it sits on your shelves, then the longer your money is tied up.
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  So stock turn matters because the faster your stock turns,
• 15:22
  the healthier your cash flow is.
• 15:24
  And the slower the turn, the more pressure is on your cash.
• 15:27
  So if this is not something that you're watching, you can sleepwalk
• 15:30
  yourself into a cash flow problem.
• 15:33
  A simple metric to measure is how much stock do I have, and how
• 15:36
  does that compare to my sales?
• 15:39
  The formula that I like to look at on a monthly basis
• 15:41
  is the number of weeks cover.
• 15:43
  So weeks cover is your stock value divided by your average weekly sales.
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  So for example, if you have £150,000 worth of stock and your average
• 15:54
  expected weekly sales for the next 12 weeks is around £10,000 a week, then
• 15:59
  you have got 15 weeks worth of stock.
• 16:02
  Now, this is a theoretical number because we all know it's not exactly like your
• 16:06
  stock would last for 15 weeks because you'd be selling down to nothing.
• 16:09
  But it's a really good yardstick for you to measure and to understand how
• 16:12
  much stock you've got in your business and whether or not it's going to be
• 16:16
  Whether or not it's growing and therefore eating up more cash, or
• 16:19
  whether or not it's decreasing and any stock clearance activities that you
• 16:22
  are doing is act- are actually working.
• 16:26
  So most retailers will know what their sales are, but they don't necessarily
• 16:29
  know what their stock number is.
• 16:31
  And that can cause stress because they can't see if they are, in fact,
• 16:36
  keeping an eye on turning their stock quickly or whether or not
• 16:40
  they are just letting it pile up.
• 16:43
  So if you don't have a stock plan, then you can start by simply
• 16:46
  monitoring your stock levels every month and working out is my stock
• 16:50
  cover going up or is it going down?
• 16:53
  It's another reason why it's a great thing to have a sales plan because
• 16:55
  if you have a sales plan, you'll know what your forecasted average weekly
• 16:59
  sales for the next 12 weeks are.
• 17:01
  If you don't have a sales plan, you're gonna have to estimate that number.
• 17:04
  So I would set it up, set up your sales plan, work out each month what your
• 17:09
  average weekly sales for the next 12 weeks coming up is, and then use that
• 17:13
  to calculate how much, how many weeks worth of stock that you have got.
• 17:17
  And then that is one number that you can look at each month and ask yourself,
• 17:20
  is this going up or is it going down?
• 17:22
  Now, you will typically carry fewer weeks worth of stock in peak times.
• 17:26
  So when you're in the run-up to Christmas, you would expect your number of weeks of
• 17:30
  stock to be lower because you're expecting a big sales increase, for example.
• 17:34
  And then in January or February, then your stock will mo- most likely be turning
• 17:39
  slower than it is at the peak times.
• 17:41
  However, you don't want it to get too out of hand, and you wanna make sure it's not
• 17:46
  increasing and creeping up year on year.
• 17:48
  So all of those reasons are the perfect excuse to take a look once a month at
• 17:53
  how much stock that you've got and to make sure that you have a record of
• 17:56
  that So my slightly old fashioned view is I still love a spreadsheet because
• 18:02
  it's one place that, that you can record these numbers, it's one version of the
• 18:06
  truth, and it's easy to review trends.
• 18:08
  Yes, you can calculate a lot of this information by asking Sidekick,
• 18:12
  you can get reports run, you can get plug-ins and tools that will
• 18:17
  look at some of this data for you.
• 18:19
  But if each week you note down in a spreadsheet what your weekly sales
• 18:22
  are, and each month you note down what your sales margin is, your sales
• 18:26
  versus your target, your sales versus last year, the stock value that you're
• 18:30
  currently holding, and the number of weeks cover, then you have got one
• 18:33
  place that you can very quickly see, in seconds, how the business is doing.
• 18:38
  So make sure that you're building something that is for you.
• 18:41
  This is for you.
• 18:42
  It's not for an investor.
• 18:43
  It can be extremely simple.
• 18:45
  In fact, I would much rather that you wrote something down on a Post-It note
• 18:48
  and stuck it on your screen than you went ahead and created something that
• 18:53
  was really complicated, was hugely difficult to keep updated, and also just
• 18:58
  didn't give you that much information, or something that just put you off
• 19:01
  ever doing it 'cause it took too long.
• 19:03
  You want a dashboard that helps you make decisions.
• 19:06
  Do I need to improve my margin?
• 19:07
  Do I need to spend less on stock?
• 19:08
  Do I need to take action to speed up my stock?
• 19:11
  How am I doing against my breakeven analysis?
• 19:14
  What do I need to do to keep moving this business towards profit?
• 19:17
  You don't need to drown in data, you just need to answer these three core questions.
• 19:22
  Am I making enough profit on every sale?
• 19:24
  Am I selling enough to cover my costs?
• 19:26
  And is my stock turning enough?
• 19:29
  So don't forget, keeping it simple can really help you take action, as opposed
• 19:35
  to making it too complicated and then just getting stuck in the complexity.
• 19:39
  So why not take 30 minutes, go through all of the reporting tools that you're paying
• 19:44
  for, work out which you actually need, and then create one simple place to track
• 19:49
  those three key stats, because clarity beats complexity every single time.
• 19:56
  If you want to know how to get a handle on the three key numbers that you need
• 20:00
  to know in your business, then head over to resilientretailclub.com/numbers and
• 20:05
  download my free guide of the key numbers that you need to know and how to get them.
• 20:11
  Thanks for listening.
• 20:12
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• 20:15
  You can rate it inside Apple Podcasts and also inside Spotify.
• 20:19
  And of course, if you like, follow, or subscribe, you'll be the first
• 20:22
  to know about each new episode when it comes out on a Thursday morning.
• 20:25
  See you next week