Achieve, plan your 2008 financial goals

I’m an admitted planner and organizer, not a recovering one. Most business managers share some desire for organization and planning, but not with the passion (obsession) I have. With the arrival of the New Year and an abysmal rate of success for resolutions made on Dec. 31, I’ve taken stock of how my plans for the New Year are shaping up. I’m devoting this column to helping you get started with that process or move it a step further along.

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Keys to achieving financial goals

What are your financial goals for the business this year? One of the easiest tools with which to plan and evaluate your financial success is the Strategic Profitability Model, developed by DuPont decades ago (and sometimes still referred to as the DuPont model). The model offers three keys to making money: earn it by generating profit margin on every dollar of sales; turn it by turning assets into sales; or leverage it by borrowing money.

1. Net profit. Calculate your net profit margin by dividing net profit dollars by sales. This can be easily converted to percent by multiplying by 100 and likely ranges are from 2-5 percent or higher. This shows how much money you made on every dollar of sales. If you don’t track this percentage from year to year, both on average and for key products or services, now is the time to start.

2. Asset turnover. Asset turnover is another key financial figure you should be tracking. That’s the middle part of the DuPont model where gross sales is divided by total assets, which is everything the business owns.

Service businesses should have fewer assets and likely have an asset turnover of 3 to 5 or more. Production businesses that own many assets, including land, have lower asset turnover, closer to 2 or 3.

Multiply asset turnover by net profit margin to determine return on assets. This should be 12-20 percent and is the product of how much a company makes on every dollar of sales (net profit margin) and how effective it is in turning assets into sales (asset turnover).

Most businesses are better at one or the other. Track both and look for ways to increase those numbers in 2008.

3. Employee sales. Everyone should be measuring sales per employee. Divide sales by the number of full-time equivalent employees. This is an excellent measure of efficiency or how well people work. Labor-intensive businesses are closer to $65,000 but efficient and high-tech businesses can approach $150,000.

Know the average sales per employee. It will help a company decide when to hire the next person and understand how efficiently its staff is working.

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More retail numbers

Retail businesses should track a few additional numbers.

Average sales per customer. Retailers should know average sale per customer (weekly sales divided by weekly customer count). Every employee should know this number because this is one key way to grow sales. It’s much easier to sell more to the same consumers than to find new customers.

If a company knows the starting point, it can more easily train staff members to enhance that figure. Most employees can ask customers about their need for gloves, mulch, pruners, fertilizer, hoses and nozzles. This may create an add-one sale before they check out.

ZIP codes. If you’ve read some of my previous columns, you know how much I like using U.S. postal ZIP codes for marketing. These should be collected at the cash register, too. Don’t just collect them, but commit to investigating the demographics of your market. It can make a big difference in helping you decide to whom and how to advertise.

Displays and themes

Have you planned your displays and themes for the busy spring season? Whether it is a weekly color theme, color combinations or something more entertaining, now is the time to draw up display plans.

After you’ve identified the themes, select some key display areas and develop a plan for them. Consider what plants and complementary products might fit best in those displays. See what’s in storage and get creative on how to give old stock a fresh look. Delegate the display coordination to key employees and give them some help to construct the displays.

Training programs

What shape is your training program in? Not physically, but intellectually. Do you have weekly meetings? These are key to getting staff on the same page for product deliveries, inventory that’s ready or not to sell, as well as introducing new people and new products.

Schedule brief training sessions (30 minutes or less) and have employees stand during presentations. Rotate leadership responsibility so that everyone has an opportunity to run the meetings. Plan some key safety updates once per month, which may require a longer meeting. Let the staff discuss what worked last week and what potential problems might arise this week. Don’t forget to praise great work for the prior week.

Do you have an emergency plan? Now is a good time to draw one up. Back up critical data once a month and don’t store it in the drawer beside the computer. Make sure it is taken off site each night and that it is fireproof and waterproof.

Delegate a spokesperson to talk with the media if the need arises. Provide them training in how to interact with the press.

Check insurance policies and schedule a review if you haven’t had one in three years. Consider cross-training key personnel so they can do multiple jobs. Having key people leave, for health or other reasons, can devastate a business during the busy season.

Most times, people are better at planning crop production than some other aspects of the business. Take advantage of the first month of the New Year to put your plans in place. Then, take a cue from the late Peter Drucker and put those great plans into action. Drucker, a management expert, said, “Plans are only good intentions unless they immediately degenerate into hard work.”

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- Bridget Behe