Living By The Numbers
Recognizing where my numbers need to be
By Vance Breese
I don’t have the same taste as my customers. Clearly I am more committed to all things motorcycle than most of my customers. As an example, for years I carried electric vests because I liked them, but my market was so small and the weather was so nice I was never able to make a profit.
When I would take my annual inventory I would spend too much time on all the things I liked and too much time hurting over the big mistakes I had made. A well run inventory should turn 3 times per year so even at a 33% margin makes it a 100% return on investment. That means if something that cost me $100, then has a birthday in my store, it now just cost me $200. It was very hard for me to admit I had made a mistake and blow it out for less than cost, but if it were to have second birthday in my store, now I have $300 invested in the item. The concept is called lost opportunity. Inventory is a tool to make money, but I found that I been making a personal and emotional investment in items. If I don’t have the money to buy inventory then I have lost the opportunity to make money. The really sad part is I have spent the money to create the opportunity and the mechanism to process the sale.
What I needed was a divorce from my inventory and I didn’t want to continue to make support payments. I started by doing it by the numbers for 80% of the parts. If I sold one in five months I stocked it. I stocked a one months supply, Simple and it helped. If something spent a year in the store I sold it for half of cost. Red tag sales worked well for me because people had to look thru the rest of my inventory to find the deals. It is amazing what people will buy if it is a deal.
Clothing is even more critical because, in my opinion you need to have all the sizes even though most of my customers were extra large. This means if you find out that a particular leather jacket style doesn’t sell you have to discount them sooner.
Service parts don’t necessarily go by the same numbers because if you have to pull a bike off the rack for the lack of a part, you have lost money on the job.
As I got more sophisticated I began to study the history of parts and the margin and soon realized that I would rather sell something with good turns or a good margin than something that is really cool.
I had to be careful about counting discounted items as a sale. It didn’t take me very many mistakes coming back into inventory to raise my pain to the level where I learned something new.
Playing by the numbers lowered my level of stress and helped my bottom line.
About the time things seemed to be going well emotionally, I hired a person to work the counter and they didn’t share my pain and returned my inventory to emotional chaos. I needed to do the purchasing because his bad taste made mine look discriminate.
Here is the rub, I may have been the better salesman than the new counterman, but I learned that I needed to spend more of my time away from the counter in order to keep my head around the inventory.
Tags: Counterman Pro, economic survival, motorcycle accounting software, Point of Sale Software, PowerSports Dealer