How good are you at setting meaningful targets for your business?
In big business there’s an expression I have heard many times – “What gets measured gets done” – and it’s very true in many ways. Targets are an important tool that drive the very foundation of what you do each day and the important decisions you have to make. In essence, if you haven’t set any direction financially or otherwise how do you know what you can invest to keep your brand and product relevant?
Your targets can be based on history or aspiration but they do need something to anchor against and you need to believe that you can achieve them. These foundations come from your masterplan for the year and the goals that will get you there. I’m not saying make them easy to believe you’ll make it, but if you need to make a certain amount of cash to keep your offer moving for your customer or to invest in your infrastructure so you don’t fall behind your competition then you need to reflect this in your targets.
Retail businesses rise and fall based on cash flow, if you don’t have the money to invest then your offer and how you present it will fall behind the market. If you are trading hand to mouth then you won’t be able to take advantage of new opportunities that come your way. You need a plan that creates financial breathing space through the year and this plan requires sound targets that means everything you set on your to do list are keeping you on track to get there.
So where to begin? I’d start with your customer goals – what do you need to do to ensure they keep coming back to you or you are showing up in the marketplace so new customers want to buy from you. If your goal is a new range of stock or keeping money available for new products that come up frequently in your market, then your sales plan should take into account what you think you will gain from these and when this will come through – this will translate into your sales target. If these new products are to be sold at a better average margin than you have been achieving then this needs to be shown in your profit target which will come from your sourcing plan. If you need to have a cleaner position on your deadstock then this should be reflected in your stock target which will be driven by the plans you have for promotions.
I’m sure you see where I’m going on this, everything you do in your business will have an impact on your turnover, stock holding or profit somewhere – you want to make sure that this is a positive one eventually and that you are measuring the benefits in your targets. If you are not getting close to your targets and something is wrong and it needs looking at you won’t pick this up until it’s too late. Your planned timeframe could need changing or the goal driving it may not be going the way you intended – either way keeping close to your targets will tell you to make changes sooner rather than later and allow you to get back on track.
This is not isolated to investment in product ranges – how you present it and the customer journey will equally need to be shown in your targets. A new website or update for example takes money to implement, you need to understand how you will see this back in your sales and how long it will take – it could impact your profit and cash flow for however long it takes to build and the tangible benefits of faster purchasing or better navigation need to be planned into your sales target. If you’re changing to a different courier who promises faster delivery or deciding to rent warehouse space for the first time how will you show this in your costs and profit? Are you increasing your prices to reflect and netting out the impact or is this investment going to allow you to stock more volume of your big sellers so you will see the sales benefit this way? It all needs to be in your targets.
This brings me onto systems, my favourite bit. Anyone who knows me well knows I love spreadsheets and my life is run by them. I have spreadsheets for everything, including holidays, and I obviously have a few for running my business. You can develop something that holds your targets and the KPIs (Key Performance Indicators) that are most important to you and your goals on so that you know your plans are on course for success. You can set how often you will update and review them (mine are weekly, rolled up to a month, quarter and year) based on your business model. You can put last year’s numbers in if it’s growth you are after or simply measure against your planned sales target if you are a new business or radically changing what you are doing in your market.
Large retailers will likely have something called a WSSI – weekly stock sales and intake that they use to track their biggest investment – stock holding. They will plan in their sales targets and see how it impacts what stock they can hold and if they OTB or open to buy which is cash available to buy new product or repeat volumes on their best sellers. It’s here they will see where they have too much in their warehouses and that they need to up level their promotions to keep in line – it’s all targets. This is a great system tool and I have seen some with margin added to see the full impact of decision making.
Data is king in the target world and anything you can get hold of that tells you how you are doing should be harvested and kept. Forward planning will always initially start with any history but should never be based fully on this – you should always be looking at how you can do things differently to make more profit, if you don’t then your business will go backwards as your competitors adapt to what is becoming a very fast changing industry.
We have seen so many well-loved brands leave the high street as they didn’t change what they did to enable the right investment or really look at how they could retain their space in the market and the customer heart. We look back fondly on what they used to do but it didn’t stop us as consumers changing our habits and moving with technology or new brands that offered us more convenience and value. Those that have weathered the storm so far have made plans and set targets and they have changed direction if their goals have not worked as they thought, they could see that the value they expected was not coming through.
Love your targets and they’ll look after your business.