9 Tips on Managing Your Inventory for 2011

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Dec 20, 2010 - The holidays are in full swing and products are flying off the shelves.

But have you thought about your inventory strategies for next year?
Here are a few ways to manage your inventory in the new year:

Be careful with end-of-year purchases“The holidays are almost here, which means that unless you are looking at egregious holes in your assortment, sell what you have,” advised Ted Hurlbut, principal at Hurlbut & Associates, a business management consultancy in Foxborough, Mass. “At this point, anything that you bring in will sell in place of something you already own. Then, you will have to go through the clearance process on what you already own.
“One of the real margin killers during this time of year is bringing in last minute purchases.”
Mark down poor sellers“Identify your weak sellers and mark them down to move before Christmas, when your traffic is at its peak,” Hurlbut said. “If you wait until you take everything at 20 percent of after Christmas, you will have to take your weak sellers to 50 percent off, instead of the 20 percent off you could have done before the holiday.
“The markdown will cost you less now than it will later.”
Cycle inventory “Retailers have a tendency to fall in love with their inventory, so they keep it past the time they should,” said Peggy H. Taylor, co-owner of Progressive Profit, a retail consultancy based in Fairview, N.C. “If it doesn’t sell within 90 days, you need to get rid of it. If you’ve had something in your store for a year, chances are you will never sell it. Donate it to good will and you can write it off on your taxes.”
Use the garbage can“Identify your sludge and dispose of it,” said Hurlbut. “For example, if you have a rack filled with great clothes and one mustard yellow shirt, some customers will be turned off to the entire rack because of that shirt. Get rid of it. If you have it heavily marked down and it still isn’t moving, it has no retail value and could be dumpster fodder.

Want more financial management tips? Check these out:

* Inventory: The Crucible of Success
* How Well are You Managing Your Inventory?
* Applying the 80/20 Rule to Your Inventory


“Then, you can take a tax credit for it. By keeping it, it is poisoning everything else.”
Record everything“Make sure that all of your material is properly recorded,” said Jon Schreibfeder, president of Effective Inventory Management, Inc., an inventory management consultancy based in Coppell, Texas. “Otherwise, you will have no idea what is in your store or warehouse, which means you would be forced to overstock to maintain a high level of customer service. You also might be reordering products way too early or too late.”
Display seasonal items“Don’t pack away any seasonal items unless it can’t be prevented,” Hurlbut said. “Maximize your cash recovery now. Cash is more valuable to you now than in six or nine months. If you put something away, new things will come along and make the item not as valuable.”
Forecast, forecast, forecast“Make sure you have the best possible forecast,” Schreibfeder suggested. ”A good forecast is made up of five different elements: past sales, trends in popularity of an item, external factors such as weather and the economy, collaborative elements such as events, and the time of a forecast—today’s date less a product’s lead time.”
Write a list“Develop an approved stock list and know what your customers want you to have in stock,” said Schreibfeder. “A lot of small business owners have stock and then they have stuff, which are the things the customers don’t want or don’t expect you to have. Liquidate the stuff; it will free up space and cash.”
Stay informed“Even if you’ve had a tough time in your business, you should be going to market,” Taylor advised. “You should go to market no matter what. That is where you see new things. Even if you don’t buy anything, you can be mentally shopping and ordering for the future.”

Katie Morell is a Chicago-based freelance writer specializing in small business concerns.

Free 2011 Business Growth Planning and Goal Setting Session for Independent retailers.

Progressive Profit is offering a free 45 minute “Business Growth Planning and Goal Setting Session” for independent retailers.

“5 Benefits” of signing up are:

•create a sense of clarity about the success you really want to have in your retail business.
•learn the essential building blocks for having the retail business of your dreams.
•discover the #1 thing stopping you from having the success you want.
•identify the most powerful actions you need to take to move toward the success you desire.
•complete the consultation with the excitement of knowing EXACTLY what to do next to create the successful retail business you always wanted.

Sessions will begin December 1 and continue until January 31. Space is limited; to take advantage of this free one-on-one consultation, call Progressive Profit 828-628-9021.

Progressive Profit is a retail consulting firm located in the Asheville, NC area providing a wide variety of services to independent retailers in Western North Carolina, the Upstate of South Carolina, and Eastern Tennessee. For more information about Progressive Profit, go to their website: www.progressive-profit.com

Click the button below to go straight to the form to request an appointment. Fill Out My Form!

A Tale of Existance, Persistance, and Success

by Evan Wise

Levy’s Menswear of Nashville, TN recently celebrated its 155th anniversary in the menswear business. The owner, David Levy, has been a client of Management One® and Tom Licking (Tucson, AZ) for twelve years. Evan Wise interviewed David and learned about Levy’s over the years.

Levy’s in Nashville has been taking chances and making them work since Zadoc Levy bought some fabric and opened a dry goods and tailor shop in 1855. To put that in perspective, Franklin Pierce was president and Abraham Lincoln was still a lawyer in Illinois! Imagine running a tailor shop on a dirt road that turned to mud in the rain and at a time when an outhouse was a luxury that many did not have. Zadoc overcame the obstacles of the day and kept the shop going through the Civil War and the Reconstruction afterwards.

Taking chances and making them work is the continued story of Levy’s. The Levy family went on to survive two world wars and the Great Depression. Zadoc’s sons, grandsons, great grandsons and finally David Levy, his great great grandson, took over the store in 1998. During that time span, the Levy’s overcame generational challenges, family difficulties, several large floods and great cultural change. In 1962, a water main burst and flooded the basement of the store. Fortunately it only ruined a storeroom full of old goods for the sidewalk sale. The insurance company bought out the sale goods that year!

Changing styles created challenges as well. “When lapels suddenly got smaller in the 70s, we ended up selling off a million dollars of inventory at half cost. People still come in and brag on the great deals that weekend,” David recalls. He remembers when leisure suits made retailing difficult as the look became more casual. “How do we sell suits now?” David posits and explains the preppy days kept people from replacing their wardrobe – but then along came the Italians to reinvent the luxury clothing market. “We took an early risk with Ermenegildo Zegna, however it paid off.”

Levy’s grew to several branch stores but as people were able to travel more easily, the decision was made to consolidate to one store in Green Hills. “We were transferring goods daily from the downtown store, where the merchandise was not selling, to our current location, where it was flying off the shelves! Focusing on one store made sense, but the challenge of getting out of leases and dealing with our bank to make it work made surviving this current recession look like a cakewalk. We really had to balance our cash then!

David took a risk and bought out his cousin, placing full responsibility on his own shoulders. ”As far as I know, I am the only family member since Zadoc to purchase stock from the corporation and family,” he explains.


Evan Wise is an owner of Management One, a retail and business consulting service.

How to Build Wealth for Your Business

Small Business Advice - Financial Health

by Richard Branson Thanks to Ann Adley

1. On big companies vs. small companies
“Small is beautiful,” Branson said. “This may seem like a peculiar boast,” he added, but he doesn’t see size as a competitive advantage.
His Virgin Records label is not the biggest in the music industry, but in 1992 it attracted the Rolling Stones. Virgin Airlines has a mere 37 airplanes versus the 700+ maintained by its competitors. It’s better to spin off a company into a second smaller company (as Virgin Atlantic spun off Virgin America) than grow larger, Branson believes, because smaller companies can stay both more nimble and more customer-focused. They can also maintain the style and “cheekiness” of their early trailblazing if they stay relatively compact.

2. On the foundation of a brand
Branson believes that “outstanding brands are built around great people who deliver consistently great customer service every day.”
Ultimately, a brand is only as good as the products behind it. A business’s top priority is to get its products right, and then wrap a great brand around it. “You can’t kid people,” Branson said.

3. On his inspiration in nature
Virgin has a “lot in common with bumblebees,” Branson says. The aerodynamics of the bee’s biology suggest that it shouldn’t be able to fly. “But it just goes out and does it.”

4. On seeing things through your customer’s eyes
His inspiration for Virgin Airlines grew out of his own miserable experience as a passenger on commercial airlines replete with “dreadful service.” Virgin went head-to-head against the “well-oiled marketing machines” of the “big, boring competition,” Branson said.
“We didn’t know how much we didn’t know,” he added. “We had no idea how serious airlines were supposed to be run—so we looked at it entirely from the passenger’s perspective.”

5. On positioning
Virgin decided to compete on service—rather than price—as a way to set itself apart from other air carriers. Virgin also “focused on what we knew best—entertainment,” Branson said, positioning his airline as a “well-priced product [that would] make flying fun again” via perks like onboard bars, massages, power plugs at every seat, the flexibility to order food in your seat when you want it, and so on.
“We weren’t out to be the biggest, but definitely to be the best,” he said.
6. On hiring
More companies look for employees with relevant experience first. But from its outset, Virgin “hired friendly over experienced,” Branson said. It sought out employees who had fresh perspectives, great attitudes, and were eager to have fun, and then trained them to do their jobs. Those who arrived with experience from other air carriers were those who essentially “had learned how to not do their jobs,” he said.
Branson also believes in promoting from within. “We try to take people on from within,” he said, because “we know their weakness and strengths.” What’s more, he said, he often promotes people above the position they expect. “We take a risk. You can start off as a cleaning lady and go to the top.” Also, hiring from within “doesn’t demoralize people in company,” Branson added.

7. On listening to customers and employees
Branson is well known for his personable management style. Early on, he wrote monthly letters to all Virgin Group employees, and every employee was given his home telephone number. He extends that openness to customers, too, at times randomly calling select customers to inquire about their experience on his airline, for example.
Have a “fearlessness of engaging with people,” Branson said, because “conversations can change the world.”

“We like to listen to our customers, because it’s an opportunity to be creative,” Branson said.

8. On social media
For businesses, social media offers both challenges and opportunities, Branson said. For example, an unhappy Virgin passenger might use the megaphone of a social media platform to complain, when a push of an onboard call button would resolve the issue, Branson said. But at the same time, social channels can help your customers find one another and allow them a change to interact, which makes an onboard community on an airplane, for example, a “smaller, warmer, friendlier” place.
Branson believes that when businesses carefully monitor and respond, social media helps businesses anticipate needs. For example, when a Virgin passenger expressed his concern on Twitter about whether he might make his connecting flight, Virgin staffers made sure he made it.
Social channels can also offer immediate feedback on what your customers will respond to: When Virgin America announced a fare sale on Twitter, it became the fourth highest sale day in the airline’s history.

9. On having a sense of humor
Approaching business playfully, and with a healthy sense of humor and fun, is critical. Virgin “built its business on free advertising, and largely with a sense of humor,” Branson said. A “cheeky” approach to business and “fun, gentle digs at competitors help put your name on the map,” he added.

10. On failure
Entrepreneurs take risks, Branson said, and as such “mustn’t be afraid of failure.” Failure doesn’t damage a reputation as much as some fear, he said. And anyways, it’s more fun to challenge yourself to succeed than to not act out of fear of failing, especially as success begets success: “If you can run one business well, you should be able to run any business well.”
True entrepreneurs “love challenging themselves, and love challenging the people around us,” especially when it comes to succeeding in otherwise established markets, where most businesses are “diabolically run.”

11. On his fascination with space travel
Branson founded Virgin Galactic in 1990 with a goal of making commercial space travel viable, but the idea grew out of a longtime passion for an idea that he worked hard to make a reality. (Which is, by the way, exactly what entrepreneurs do more generally, in other industries.)
His fascination with space travel took root when he (along with the rest of the world) watched the first manned spacecraft land on the moon in 1969. After seeing Apollo 11, he said, “I assumed I’d be going into space.” And decades later he worked to develop a reusable, safe spaceship that could make suborbital spaceflight a reality. Now, he says, commercial space travel is only a year or so away.

12. On the importance of company culture
Everything comes down to the people you hire to run your company, Branson said. Those running the company have to love it, and they also have to believe in the products you sell. The CEO must care as much about the cleaning ladies and switchboard operators as well as the company’s other directors.
The Virgin Group tries to maintain an equal number of men and women on its boards and in it’s staffing. Too often corporate boards are overwhelmingly male, Branson said, but he believes companies benefit from a more equal split.

13. On partying with employees
It’s important for higher-ups to get to know people on a personal level, outside of work. “We encourage as much partying as possible,” he said.
For executives, that means staying at the same hotel where your staff stays, and hanging out at the bar with them, after hours. “You’ll get the honest feedback at a bar,” Branson said.

14. On success
With success comes wealth and fame, but also enormous responsibility to help other people and improve the world we live in, Branson said. He now spends most of his time on humanitarian and social issues.

15. On which business is his favorite
Branson doesn’t run any business daily, as he’s become expert at the “art of delegation,” he said. But those businesses that interest him most tend to be the ones that are struggling.

“The businesses I become closest to as those that are like a child getting bullied; I tend to spend more time with them than with other businesses” to help steer them onto the right track.

Image credit: Charles Nicholls

What You Don’t Know Will Hurt You

The more retailers I talk too, the more I find out how little they know about their own business. Oh, they tell you they are doing fine, but you can see the look of fear on many faces. Most people do not know the overall health of their company, and those who need help the most are the fastest to deny they do. The following article about cash flow forecasting seemed appropriate to print here since most of the retailers we talk to don’t know how to calculate it, they are operating on a wing and a prayer.

The 5 Secrets of Cash Flow Forecasting
by Ken Kaufman

While forecasting cash flow may sound like a smart idea every business should implement, you might be surprised how many don’t. Most businesses have no formal cash flow forecasting process in place to plan for and manage the short-term excesses and shortages (also known as peaks and valleys) of cash flow every business experiences.

Regardless of what accounting software you use, it is often best to start your forecasting efforts in a spreadsheet and then try and automate the process with software. Here are the five key secrets to accurately forecast and maximize the cash flow of your business.

1. Weekly for at Least 90 Days into the Future

It is usually appropriate to look at cash flow on a weekly basis — usually as of the last working day of each week. It should also extend, by week, at least 90 days and as many as 180 days into the future. Depending on your needs, between 90 and 180 days is usually sufficient for short-term cash flow. It is important to compare the actual cash flow results from each week to your projections to improve your assumptions each week.

2. Collections by Customer

Now that you have the timeline and frequency handled, you need to look at your cash inflows, which primarily come from customers. First, you need to determine how long it takes to collect from each customer (if you have less than 50 total customers). If you have more than 50 customers, then you need to separate your customers into payment classes such as credit card sales, cash, net 15, net 30, and so on.

Second, you should schedule out when you are expecting payment, by week, for each of your existing receivables. Third, based on your sales projections by customer or payment class, you need to project your subsequent collections for the duration of the forecast. Often the best way to do this is to look at weekly sales for the prior few years and project based on growth or shrinkage factors for each customer or customer class.

3. Separate Variable and Fixed Outflows

It is almost always easiest to separate the variable from the fixed expenses by vendor and type. The variable expenses will be driven by your sales projections and the terms with each of the vendors in this category. The fixed outflows include all cash fixed expenses plus debt payments and regular distributions to owners, if there are any. You may need to separate the variable and fixed portions of payroll and payroll taxes, but you need to make sure they are included.

4. Taxes and Other Quarterly and Annual Outflows

I seem to meet at least one business every month that does not properly plan for its need to pay for taxes in its projections. The result is a business that has to delay other payments and, sometimes, even payroll until the cash flow cycle recovers. Since a lot of businesses are operated as flow-through entities to their owners, the owners typically distribute money either quarterly or annually to meet their income tax obligations. The cash flow projection needs to include the payment of all taxes to manage its impact on the peaks and valleys of the cash flow cycle in the business.

5. Bridge Valleys with Financing

So, why do you bother to go through all of this effort to understand your short-term cash flow? Among many other reasons, so you can see in which weeks your cash flow will become negative, how long it will stay negative, and by how much it will go negative in each of the valleys in your cash flow cycle. If the cash flow is only negative for a week or two, then you can likely handle it by slowing down your payment of payables or through some other working capital “tweak.” If it is longer than a few weeks, then you need to plan for how you use other sources of financing to bridge the valley until cash flow recovers.

Not knowing what will happen to cash flow at least 90 days into the future is a great source of anxiety for most businesses. Conversely, having an accurate projection of cash flow that is updated each week removes the anxiety of the unknown and empowers the business to solve any problems or issues before it is too late.

In addition to maneuvering through the valleys of cash flow, it is almost as important for a business to manage its excesses, or peaks, as well. Whether it is merely implementing a treasury management solution to earn some interest or to know that the business has enough cash make a critical capital expenditure, forecasting cash flow will empower any business to manage and plan for its most vital resource — cash.

Ken Kaufman, Founder & CEO of CFOwise®, serves as the Chief Financial Officer for a dozen start-up, emerging, and medium-sized businesses. With almost two decades of experience and as an adjunct professor and published author, Ken focuses his professional efforts on helping entrepreneurs maximize cash flow, improve profits, and obtain clarity.

Retailers who stay on top of their financial health have much more peace of mind; the are proactive and use forecast plans to tell them when it is time to buy inventory, when it is time to markdown inventory, and by doing this they can forecast their profits as well. Smart retailers have a much higher ROI than those flying blind. Which one are you; the guy who is living day to day not knowing what is going to happen and blaming it all on the economy, or the guy who has money in the bank and is enjoying his business?

Tomorrow is Another Day

I’ve talked to a lot of people recently who have reached the end of the line with their business. Some have been in business 30 years and these economic times have beat them down. I talked to one fellow yesterday who is just hanging on long enough for his lease to expire and he will shut the doors. Meanwhile he is working 60 hours a week at another job to stay afloat.

People think because they have been doing something for 30 or 40 years they know everything there is to know about how to run their business. Times have changed; retail is different now than it was 40 years ago. If you haven’t been riding the retail wave all these years and changing with the flow, you don’t know nearly as much as you think you do. Sometimes all you need is someone who is not personally attached to your business to take a look and evaluate it for you, so you can see what you need to do to be more profitable or make the changes necessary to save that business and keep it from going under.

Here is something to think about:

“It’s not hard to make decisions when you know what your values are.” ~Roy Disney

More About Mobile Shoppers & What the Future Will Bring

Predictions are by 2012 about 50% of all mobile phones will be smart phones. These newer devices offer high-definition touchscreens interaction, location-awareness, camera interfaces, and an “always on” Internet connection. If this is not enough, there is the easy download of “apps,” making it simple for anyone to add new programs to their phone, and shoppers have a powerful tool in their hands to check prices, read reviews, locate products, manage lists…and just about any other shopping feature imaginable. And, the phone manufactures are all competing with each other to see who can produce the next latest and greatest mobile device.

Retailers who plan to stay ahead of the game are introducing new technologies into their stores. The QR code in my previous post will be seen everywhere in the future. Not only will customers be able to scan the code of details about the product, their phone will also replace their wallet and credit card when they check out. Retailers will also be sending ads to customers via the phone, and with GPS info they will know when the customer is in their neighborhood so they can send out a quick message to lure the customer into the store.

The possibilities are endless when it comes to all of the changes ahead in the future using mobile devices. Some older retails will shy away from the trend, while younger ones will take it all in stride since they live on their phone now. How do you see this impacting your retail business?

What is A QR Code?

Pretty cool, isn’t it?

Just by scanning this little box of pixels with your phone you will be immediately taken to the Progressive Profit site! QR Codes, like the one you just used, provide a bridge between the printed piece and the vast potential of the web, via your smartphone. QR Codes can be used to:
• Guide individuals to your website
• Drive your customers to a personalized landing page
• Provide networking opportunities by linking your target market to your Twitter or Facebook page
• Send out coupons via text message
• Allow your customers to receive information such as directions to special events
QR, or Quick Response, Codes are becoming more and more prevalent in printed media. Companies are using them in a myriad of different ways, from a code on a real estate sign that takes you to a video tour of the home you’re standing in front of to a coupon code sent to your phone via text message, the possibilities are limitless. You can also use QR Codes to gather valuable data about the people using your code, such as:
• When they visit and for how long
• The type of device they are using
• What app they are using to scan the code
• What type of web browser your customer is using
• The ability to have customers register for mailing lists and text-alert style notifications
Now that you’ve gotten a hint of what QR Codes can do, drop us an email! One of our customer service reps will call you to discuss how we can incorporate QR Codes into your:
• Business cards
• Brochures
• Sales sheets
• Postcards
• Newsletters
• Posters

Top 10 Retail Technologies for 2010

In my quest for knowledge I came upon the 20th Annual Retail Technology Study. Following is a brief list of what they discovered is important for today.


1. Forecasting and planning
2. Price and markdown optimization
3. Assortment planning4. Product lifecycle management

5. New product or private label development
6. Allocation
7. Promotion management
8. Replenishment
9. Item management
10. Shelf and space planning

Can You Afford to Be in Business?

Years ago I was involved in an interesting business opportunity. I was asked to participate in a retail venture similar to an antique mall; a small space was rented from the owner and this became your shop. We paid a monthly fee which included booth rent and whatever they deemed appropriate for selling our good for us. Then if someone made a purchase with a credit card, we also had to give them a small percentage to cover the credit card fee. This shop was actually pretty cute and was occupied by about eight merchants who had products ranging from antiques to handmade goods to items purchased for resale. My contribution was oil paintings and miscellaneous other items to populate my space. Each merchant was responsible for the layout and design of their area, for pricing their own goods, and keeping it stocked. The only regulation was our space and our goods needed to fit in with the Victorian theme of the place.

It didn’t take long for me to realize things were not going well. The building we were located in was in a small rural town with no downtown, but it was located right on the main highway, which was good. You would think everyone would see it and want to check it out, but business was slow. The only time we really got any business at all was when the owner would advertise, and though she had originally said she planned to advertise on a regular basis, she didn’t do it often because of the cost.

Within six months, the owner realized she had a problem, but she wasn’t sure what it was. She called a meeting of all the merchants hoping if we put our heads together we could figure it out. Having been self-employed for many years I didn’t have to listen for long to realize her problem was she wasn’t making enough money to cover her expenses. The only money she was taking in each month came from the merchants rent and profits from whatever she sold. The total of what she charged the merchants for rent only covered about half of her monthly rent and she still had expenses for utilities, etc. on top of that amount. I told her my advise to her was either raise the rent she charged the merchants to cover her expenses, or to go out of business. Everyone looked at me like I was nuts, but it really was the only solution. I also suggested she charge the merchants a monthly advertising fee. Once again I received strange looks from the group. Everyone was against my suggestions, yet the only thing I could say from there was: “You get what you pay for.” Within a month, she was out of business.

The biggest problem most people have when they go into business is not having enough capitol to subsidize the business for about three years. And, most people haven’t done their home work to figure out how much it really costs to run a successful business. I personally believe the most important one thing in having a successful business is your ability to promote the business; if you can’t afford to market yourself, you can’t afford to be in business. Luckily today there are many ways to promote your business that do not require a large outlay of money, but they do require the time it takes to do it. More on the subject of promotion later.