Buying Smart; Selecting Among Snowboard Brands

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Ain’t business grand? You’ve got a choice of something over 100 snowboard brands to sell in your shop. ‘Course, 20 of them will be gone by the time the snow melts and next year there’ll be 35 new ones. Delivery, not to mention service, is uncertain.  Some of those new companies will be only as real as the ad they managed to scrap up enough cash to run in Transworld.

But hey, if the graphics are cool, the product is new and there aren’t many of that brand around you can probably sell some as long as the construction is solid, they are delivered on time and there’s a semblance of a marketing program.
 
Let’s assume that, like most shops, you’re going to carry some old brands and some new ones. I’ll leave it to you to figure out if the graphics and shapes are right. If I could do that with any certainty, I probably would have been in a position to buy Transworld myself instead of letting Times Mirror do it. 
 
So into your store walks the sales rep, or into the booth you walk at the trade show. What factual information can you have that would allow you to compare brands from a business perspective and keep from being completely carried away by the enthusiasm of the moment? A checklist with the following information would be useful.
 
1)            Where are the boards made?
 
Al Russell, the president of Grindrite, says there are eighty (!) factories in the U. S. alone. That includes everybody from Burton to the garage that will turn out 200 hand made boards in a season. If it’s a larger factory (Morrow, Pale, Elan, Taylor-Dykema, etc.), ask who else has their boards made there. Don’t take “I don’t know” for an answer. Somebody in the company knows. If it’s convenient, call the factory and ask for a tour. The company you’re buying from can help you get in the door. You’ll learn a lot about how snowboards are made and, at a minimum, that knowledge and the fact that you’ve been to the factory will make you a more effective sales person.
 
If it’s not convenient, go anyway. Go visit a factory in Europe, spend some days “product testing” on new terrain, and deduct the cost of the trip. I like to think this industry is getting to the point where tax deductions are becoming important. Means somebody is making some money.
 
If it’s a new brand and/or a small factory you’ve got a whole new set of issues. Can they deliver in a timely manner, will they be there for service and what will product quality be like? Lacking a track record, there’s no way to tell, so be wary. Check out the people involved. Do they actually know anything about making boards? Get a couple of samples to ride. As discussed below, make sure they have enough financial strength and savvy to be around when you need them. Consider insisting on personal guarantees from the principals.
 
2)            What’s the construction like?
 
In past issues, this scholarly and erudite publication has told you all about the various constructions and the materials used. There aren’t many basic constructions and the materials are more or less the same from board to board and factory to factory.
 
Once you’ve got all this good information from questions one and two, what are you suppose to do with it?
 
You now know brands A and B are made at the same factory (or different comparable factories) with the same materials and very similar (if not identical) construction techniques. After examining the boards, it’s clear that the visible differences are only in graphics.
 
Oh yeah- and maybe in prices. If the wholesale price sheets show major differences in what you know are boards that are basically identical except for graphics, why should you be willing to pay it?
 
Maybe the graphics are so hot that a price differential is justified. Perhaps the brand’s reputation, marketing program, quality of service, warranty policy, payment terms or some combination of these justify the higher price. If it isn’t clear that’s the case, your decision just got a whole lot easier. Alternatively, your negotiating position with the more expensive brand just got stronger. “Hey, how come I’m paying you $25 more a board when the only difference is the graphics?”
 
Could lead to some interesting conversations. Even if you’ve decided that the more expensive board really is the one you want, use your knowledge to negotiate a little better deal.
 
Consider carrying the information gathering process one step further and starting a little sooner. Meet with or call a half dozen or more other retailers. Have each retailer rate each brand they carried on a scale from one to five for timely delivery, warranty claim handling, service and other factors you consider important. Share that information among yourselves and get together to discuss it. Now the questions becomes, “Hey Joe, how come I’m paying you $25 more a board for your product when the only difference is the graphics, you were late delivering and it took two months to get warranty replacements?”
 
Alternatively, you might find out exactly why you want to pay that extra $25.
 
3)            How is the company financed? Can they provide a bank reference? What does the company sell during the off season?
 
The simple fact is that financing a fast growing, highly seasonal business is tough. It takes a lot of capital for a short period of time and coming up with it can be hard, especially if you’re a new business without a history of profitability. I’m here to tell you that just because a snowboard company has an outstanding sales organization, great graphics, a strong marketing program and a good reputation doesn’t mean it’s well financed. Size and apparent prosperity is not a guarantee of financial strength. Ask the people in Orange County, California.
 
It would be nice if your supplier would give you a financial statement, but that’s probably not going to happen (except for Ride of course). Ask for a bank reference. The banker will always be cautious about what they say but in general, the less they have to say, the more reason there may be for concern. Ask your banker to get a Dun and Bradstreet report on the supplier. Ask them for a list of credit references and check them. See if they have any cash flow during the summer, or if they just lose money for six or seven months of the year. Having some summer cash flow simplifies the problem of working capital financing significantly by reducing the peak amount required and providing some collateral for bank borrowings. I imagine that has something to do with why there are so few snowboard only shops around.
 
They say that when you go to the supermarket, it’s best to go with a list to avoid impulse purchases. I have to think that’s true in Las Vegas too. To a large extent, snowboarding is the fashion business. Hype, controversy and the other intangibles are always going to sell product. You can’t be completely rational about brand selection; your gut feel and experience does count for something. But there is some hard information out there for those of you who are willing to take the time and make the effort to collect it. It isn’t too much time or too much effort, and you can significantly improve your decision making process. Not only will it show up in your bottom line, but you can expect fewer surprises and headaches once you get into the season by finding out a little more about your suppliers now.

 

 

Business By The Numbers; Simple Questions a Shop Owner Can Ask Regularly to Stay in Control

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If your typical day is a series of disruptions and interruptions like that of many small business owners, then you may find yourself having difficulty controlling your business and knowing with certainty where you stand on a day to day basis. All businesses face challenges. Those challenges are most easily met if focused on early. What starts out as a minor inconvenience can become a survival issue if not identified and managed in a timely way.

But the disruptions and interruptions aren’t going to go away. So any system for anticipating problems and controlling your business has to be simple to develop, simple to use, and take not much time. It has to be your servant; not make you a slave to data collection. Here are some ideas on developing one that’s right for your business.
 
The first thing you need is a budget. To some people, this means a complex financial model on a computer projecting a balance sheet, income statement and cash flow. If that’s what you’ve got, great. But in the interest of keeping this simple, let’s assume you at least have a sharp pencil and some accounting paper with columns.
 
Write the 12 months of the year across the tops of the columns. Let’s start with the current month. Down the left side of the paper, enter the following row captions; sales, cost of goods sold, and gross profit.
 
Continue with the following expense categories; advertising, promotion, salaries and taxes, rent, telephone, utilities, maybe interest expense, and supplies. Finish up with pretax income for the month.
 
Now say, “I’m the only one who really understands my business” and change the categories to reflect the specifics of your shop. Maybe it would be helpful to split up sales among product type (boards, boots, bindings to use one example that comes to mind). Could be that the costs of keeping the doors open every month always total nearly the same and you’re comfortable with just one total number for these costs. Whatever works for you.
Now fill it in. Congratulations! You’ve got a budget If it took you more than an hour or two to do this in rough form, then you may have identified the first minor inconvenience that could become a survival issue; poor financial data.
Get yourself a manila folder, label it “My Control System,” and put the budget in it. You’re half way there. Now all you’ve got to do is ask a few simple questions on a regular basis and record the answers. The questions I recommend are:
 
1)    How much did we sell today? Get another piece of accounting paper, write the month on top, and the days from 1 to 31 along the left margin. Have two columns headed “Today’s Sales” and “Cumulative Sales.”   Fill in the two columns at the end of each day and put it in the folder.
2)    How much did we sell this week? Add a column to the daily sales sheet and put a weekly column every seven days. If you think it would be valuable, add another sheet of paper and look at sales by major product group weekly. At the very least, do that monthly.
3)    What’s the gross profit? Look at it weekly and at the end of the month in total dollars and record the information on another sheet of accounting paper. If you know your starting inventory, what you have received, what it cost and what you’ve sold, this is a simple calculation.
4)    How much inventory do I have? Record it weekly and at month end on another piece of accounting paper you slip into your folder. If you answered question three above, you’ve already got the answer to this one so the only additional work is writing the numbers down. A refinement you may want to consider is looking at your inventory by major product groups.
 
Now we’re getting somewhere. We have a simple budget, are tracking sales, gross profit and inventory levels. We can start to make some decisions. Trends can be spotted early and adjustments made with minimal pain. The magic of this is that the more you do it, the better those decisions will become.
 
Are inventory levels too high or too low given your sales levels? What should you try and see if you can get more of, and what should go on sale or be displayed differently? Your gross profit is higher than expected. Is sales of one brand with a particularly good margin outpacing other brands? Is this a chance to dump some stuff that’s not moving and still maintain your profitability?
Obviously, all these factors work together in a very dynamic way. With the kind of system I am describing here, you’ve got them all in front of you in a very simple format. Patterns will emerge and trends be more obvious. You don’t have to be a master of accounting to do this.
 
In fact, remember that this isn’t accounting at all; it’s management. You do not need precise numbers. I am not suggesting a physical inventory every week. Don’t count your nuts and bolts. Focus on the products that make up most of your sales.
 
Let’s move on to the expense side.
5)    What are my fixed monthly expenses? There’s a bundle of monthly operating expenses including things like rent, telephone and insurance that should stay pretty constant from month to month. Look at them monthly and don’t expect much variation. If you see it, ask why.
6)    What am I spending on salaries (including taxes and benefits)? Salaries should be reviewed weekly and at the end of the month. Weekly because they are a big expense item and can be managed relatively easily in response to changes in sales. Add another piece of accounting paper to your folder that by now has all of, oh, maybe five pieces of paper in it.
7)    What are my advertising and promotional expenses? Record them weekly or monthly depending on what right for your business. Use the same sheet of paper you use for salaries. Let’s keep this folder thin. In fact, put all your expenses on one piece of paper.
8)    How’s my cash flow? That’s probably another article, though by asking the seven questions I’ve listed above, you’re well on your way to predicting your cash flow. As a retailer, paid at the time of sale, you don’t have the collection of receivables to worry about. Your cash flow typically differs from your income statement in four basic ways. First, some taxes may be paid quarterly, though you expense them for income statement purposes monthly, as incurred.
 
Second, you’ve got terms from some of your suppliers. You recognize cost of goods sold for income statement purposes when the product is sold, but may not be paying for the product until some months later.
 
Third, you’re probably paying for fixtures and leasehold improvements at the time you receive them, but depreciate them over some period of time on your financial statements.
 
Finally, if you’ve got a line of credit from a bank, your borrowings and repayments are not reflected in your budget, though your interest expense is.
 
Shouldn’t be very hard to adjust your income statement budget for these differences and have a cash flow.
 
At the end of the month, look at your budget compared to actual and see how you did. Since you’ve been following things daily and weekly anyway, there shouldn’t be anything unexpected. As a modification, consider adding a column after each month of the original budget for inserting the actual numbers at the end of the month.
 
So here’s a tool for you to consider using. If you’ve already got a good accounting system, this can help you focus on what’s important. If you don’t, this will give you the minimum you need to control your business and anticipate problems and opportunities. This generic system should, of course, be adapted to the particulars of your business. The exact form it takes isn’t as important as using it regularly; every day, week and month. Invest a little time now and you will have more time later, and better control of your business.