Three ways to make more money

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Three ways to make more money!

• A new look at your P L statement
• Karen M. Videtic
• Associate Professor

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P L Statements are for accountants!NOT!

• Gross Sales
• Returns and allowances
• Net Sales
• Cost of goods sold
• Gross margin
• Operating Expenses
• Profit or Loss

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Skeletal P L is a snapshot of the health of
your store/business.(P L Income statement)

• Its essential to understand the components so
  you can improve your profitability.
• It is a management tool
• Sales
• Inventory
• Markup
• Expenses
• Personnel
• Expansion

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We should have our accountant convert everything
into percentages.

• s allow you to compare year to year on the same
  playing field.
• s dont lie or deceive.
• Dollars dont tell the whole story.
• Goals should be set both in dollars and percent.

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Variables comparing apples to apples!

• Net Sales 100,000 100
• - Cost of goods sold 50,000 50
• Gross margin 50,000 50
• - Operating Expenses 40,000 40
• Profit 10,000 10
• Net Sales 105,000 100
• - Cost of goods sold 50,000 50
• Gross margin 55,000 55
• - Operating Expenses 45,000 45
• Profit 10,000 10

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Number 1 way to make more Increase Sales

• Gross Sales
• Returns and allowances
• Net Sales 100

• Gross sales versus net sales
• Decrease returns
• Return damaged goods
• Increasing sales
• Complex because it affects other variables.

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Variables Lets see where we can make more money!

• Net Sales 100,000 100
• - Cost of goods sold 50,000 50
• Gross margin 50,000 50
• - Operating Expenses 40,000 40
• Profit 10,000 10
• Net Sales 110,000 100
• - Cost of goods sold 50,000 50
• Gross margin 55,000 55
• - Operating Expenses 40,000 45
• Profit 20,000 20

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Increasing Sales

• Increase sales without dramatically increasing
  expenses
• More advertising
• Run a sale
• Direct mail
• Suggestive selling
• Offer incentives
• Special events
• Trunk shows
• Sales training

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2 Decrease Cost of Goods Sold

• Net Sales 100
• -Cost of goods sold 50
• Gross margin 50
• Operating Exp. 40
• Profit 10

• Decreasing costs of goods sold add to our bottom
  line.
• There are a number of ways to do this but you
  must be smart about it.
• As a business owner, you have a right to make
  money dont feel guilty!

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What is considered a cost of goods sold?

• Cost of the merchandise (that has been sold)
• Freight
• Alterations
• Set up
• Discounts
• Any cost that relates directly to your
  merchandise.
• PS your accountant calculates this!

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How to Decrease Cost of Goods Sold

• Negotiate better prices.
• Take a higher markup
• Buy non-branded goods
• Put your own label on your merchandise
• Group buys with other retailers
• Buy off-price, overruns, overstocks.
• Negotiate freight, terms, advertising dollars,
  markdown dollars

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3 Decrease expenses without decreasing sales.

• This is the first place business owners go during
  tough economic times.
• It is also the area that can have the most
  negative impact.
• Catch 22

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What operating expenses can we cut?Short term

• Decrease sales staffs hours.
• Decrease advertising (not stop).
• Reduce utilities
• Decrease operating hours.
• Reduce special events or other promotional
  events.

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Decrease expensesLong term

• Find a smaller or less expense location.
• Reduce benefits to employees (insurance).
• Take a pay cut or dismiss employees.
• Look at large expenses.
• These should be drastic measures if your business
  is really in trouble.

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Remember that for every action there is a
reaction.
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Thank you.

• Karen M. Videtic
• Chairperson and Associate Professor
• Virginia Commonwealth University
• Department of Fashion Design and Merchandising
• 804-828-5431