Most retailers spend most of their time worrying about money. Whether sales are good or bad, there’s always too many bills and invoices. How does this happen?
Most retailers are creative. They know how to sell, they know about their products, they know how to make the store look great and they know how to make their customers feel comfortable. And how do they do this? They buy great items to fill their stores. So what’s the problem?
The problem is simple. They buy too much. They see great merchandise and they cannot say NO! But too much of a good thing is a bad thing. Every item they buy will come with an invoice that must be paid. So? Well, a store will only do so much business. We try to increase that business as time goes on and generally do. But it won’t just skyrocket because you bought a great deal of merchandise.
The answer to paying your bills and taking a profit every month is buying the right QUANTITIES, in the right categories for delivery at the right times. That’s the formula for profitable retailing. But how do you do that? Open to buy planning!
Open to buy planning will generate a monthly buying plan 12 months into the future based on the sales you project at the turn rates you want to achieve. Making money in retail is a matter of turnover. The more you turn, the more you make! Controlling turnover is done through your buying (not your selling) and controlling your buying can only be done with open to buy planning.
Most of the overhead expenses (rent, utilities, advertising, personnel, etc.) are pretty much fixed and will remain the same each month. The variable is merchandise invoices. When they grow too large, cash flow dries up and pressure sets in. With open to buy planning, you control your buying, your turnover, and your payables.
And the only thing you’ll be worried about is what to do with all the extra money at the end of each month.
