Tools & Tips
Simple Retailers’ Sales and Margin Template
The Excel spreadsheet above is a simple way to track sales and gross margins by dollars and percentages for each brand and product category. Hopefully, your point of sales system lets you produce a report that can give you this data without having to transfer data to this spreadsheet. There’s no magic in this particular format. The magic comes from having the discipline to collect and analyze the information regularly.
You might go to the Market Watch part of this web site and check out “Conversations with a Skate Retailer,” “Business by the Numbers” and “Minding Your Own Business.” They address the issue of collecting and using financial information.
This tool is a couple of years old. In our current and foreseeable economic circumstances, I don’t think it’s enough to focus on gross margin percentage. Gross margin dollars and inventory turnover deserve a big chunk of your attention. Seek out the article “Gross Margin Return on Inventory Investment- A Tool for our Times” in the Market Watch Section. The discussion of inventory risk in “Inventory Risk and Inventory Management” may also interest you.
Monthly Cash Flow Template
A cash flow is the most important management tool a business can have, especially when the cash isn’t flowing the way you’d like. This template is typical of those I have used. It’s kind of generic, and can be modified for use by either a retailer or brand. There’s no magic to the line items I’ve chosen to use. You have to figure out what works for your business and style of management.
The more you use it, the more valuable and easier to use it gets. You learn to internalize it and develop almost a sixth sense for changes. As your business grows, it becomes ever more important because you’re ability to keep everything in your head declines.
I’ve written about cash flow several times. Go to the article archive and check out, for example, the article called “A Living Breathing Thing.”
In the simplest things in our lives, we decide what we want to accomplish before we start doing. We do this unconsciously and instinctively because it’s the approach that works best.
With larger issues, like building a business, we often don’t take this approach. We start to work without deciding specifically what we want to have accomplished. The business draws us in. There’s so much to do that there’s no time to think.
How can you decide what to do if you don’t know where you want to be after you’ve done it? Begin with the end in mind.
A company’s owners need to share a common vision that will meet their goals. They need to specify what they want out of the company. All owners’ visions need not be combined into one statement, but it is important that they not conflict significantly.
The process of writing the vision forces you to think rigorously about your goals. In the process, you can expect some surprises, and to learn about yourself. Its hard work, but it will expand your perspective and help identify what is really important.
Writing a vision is a very individual activity. It can’t be rushed or done by a strict schedule. Come back to it as your thoughts evolve. Both your emotions and your intellect are important to the process.
The vision is the first step in the strategic planning process. It is the basis for establishing the company’s mission statement and goals. This clarifies how the company operates for the management team and is critical to developing a flexible, responsive organization.
The outline on the following pages will give you some ideas about what a vision statement might contain, but don’t be constrained by it. There are no right answers about what should be included.
Below is a selection of books and articles I’ve come across over the years that have helped my thinking about the action sports industry and business in general. Mostly, they’ve made me think about how companies, and managers, respond to changing business environments. They aren’t listed in any particular order.
A Fine Mess- A Global Quest for a Simpler, Fairer, and More Efficient Tax System, by T. R. Reid, is an intriguing read about about the condition of our income tax system and what has been tried in other countries; sometimes successfully, sometimes not. It won’t surprise you to learn that our tax system is a mess. In some countries, filing your tax return takes half an hour or less. It probably also won’t surprise you to learn that the fixes are conceptually simple and most of us would agree generally on what should happen. But then there’s politics and money and interests wanting to preserve or expand their special interests. It should make you mad as it does me.
Fed Up– An Insider’s Take on Why the Federal Reserve is Bad for America, by Danielle DiMartino Booth, is a look at the Fed through the eyes of an insider who was never co-opted by its insular and arrogant culture. Danielle had to work hard to get herself taken seriously because she didn’t have a PhD. When you finish reading the book you’ll understand why she left and why there’s not a chance in hell she’ll ever be back there. You should also be concerned, though that isn’t a strong enough word, about what the Fed is doing and what they believe. This is not the kind of stuff you learn in the popular press. Highly recommended.
Economics in One Lesson was written by Henry Hazlitt and published in 1946. Henry was a business journalist for around 35 years before he wrote this short, common sense book. He doesn’t have a PhD in economics. To me, that’s one of the things that recommends the book. The Federal Reserve has 750 of them. How’s that working out?
But I digress. What Henry wants you to understand is that economics is the process of looking beyond the obvious impact of a an economic change, policy, or circumstance to the hidden and long term results. So whether we’re talking minimum wages, farm price supports, tariffs, price controls or other forms of market manipulation, the impact is not just what the supporters of the policy want you to focus on. It is long term and ripples through the economy. What somebody gets, somebody else loses and there’s no way to get away from that.
It’s simple and it’s commonsensical (no PhD!). And you can get it for free in PDF form at this link.
Coming Up Short; Working-Class Adulthood in an Age of Uncertainty, by Jennifer M. Silva, was published in 2013. Through interviews with 100 young adults, and a review of other research, it addresses how the economic and social instability they have faced shapes them. It talks about how the markers of transition to adulthood have changed, and how young adults have changed as a result. If you’re trying to sell product to this group, you might care about this.
Essay on the Nature of Trade in General, by Richard Cantillon, was written, they think, around 1728 but not published until 1755 after his death. He was one of the first to get rich off possible the first bubble in financial markets (John Law’s Mississippi system). Some suggest he is the father of political economy. His essay is as relevant now as when it was written. If you get nothing else out of it, you’ll come away convinced that nothing much changes in human nature. Here’s the last paragraph of his book.
“It is then certain that a bank, in concert with a minister, is able to increase and support the price of public stock and to lower the state’s rate of interest with the consent of this minister, when these operations are discreetly managed and in this way free the state of its debts. But these refinements, which open the door to making great fortunes, are rarely managed for the sole benefit of the state, and those who operate them are often corrupted. The excessive banknotes that are created and issued on these occasions do not disturb the circulation because, as they are employed for the purchase and sale of capital stock, they are not used for household expenditure and they are not converted into silver. But if some fear or unforeseen accident drove the holders to demand silver at the bank, the comb would explode, and it would be seen that these are dangerous operations.”
It’s translated from the French, and the language is a little archaic, but you just can’t read that without thinking of the actions of the Federal Reserve, the asset bubbles they’ve created and the inherent and continuing dangers of the fractional reserve banking system we have.
The more things change……………….
What Great Brands Do by Denise Lee Yohn was published in 2014. I met Denise when I was in the San Diego area to make a speech and talk to a company about some consulting. Honestly, I don’t read business books as often as I used to (which explains why this page isn’t updated more often) but Denise sent me a copy so I read it. I’m glad I did.
I’ve discussed from time to time the importance of having a clarifying set of goals and objectives so that people know WHAT TO DO and WHERE TO FOCUS. My point, made in a general strategic sense, is that this makes the organization not just more competitive, but more efficient. I believe that efficiency saves money, or at least helps assure you spend it in the right place.
Denise wouldn’t disagree with anything I’m written (I hope), but she is way more specific in applying these concepts to branding. The examples she uses and the process she outlines is rigorous, but very doable. Now, there are lots of books on branding out there, but her book catches the things of importance that have changed in branding recently that we are all generally aware of, but often unsure how to manage.
You certainly know that advertising and marketing are no longer an adequate description of the tools you need to use in brand building. Denise tells you what the new tools are and how to utilize them. If you don’t understand the concept of “brand as business,” you will after you read this book.
The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail was written by Clayton M. Christensen and first published in 1997. The book is about how high tech companies have responded, or failed to respond, to disruptive technologies. The current edition has been updated but even if it hadn’t been, it would be well worth your time. Action sports/youth culture is not exactly a technology based industry. However, the discussion of organizational change and paralysis will strike a chord with you no matter what industry you’re in. The importance of taking risks, but not risks that bet the farm, is highlighted. And I find the idea that just because a market for a product can’t be identified and quantified doesn’t mean there isn’t a market intriguing. It’s also well backed up by examples.
The New Rules of Retail, by Robin Lewis and Michael Dart (2010), describes unequivocally how the traditional relationship between brands and retailers is breaking down and what’s replacing it. I’ve referred to the book in a couple of my articles. They talk about the imperatives of 1) providing an experience for the consumer that literally makes a neurological connection in their brain, 2) having preemptive distribution and 3) controlling your value chain. And, by the way, they note that operating really well is not an advantage- it’s just the bar you have to get over to even have the chance to compete. If what they want you to do is a bit intimidating, it’s also compelling. As usual, the bigger the challenge the greater the opportunity for those who rise to it. Their discussion of VF Industries may be of special interest to my readers.
John Mauldiin’s Endgame, published in 2011 is the easiest to read, most straight forward explanation of what’s going to happen, and is happening, as the world economy deleverages from its debt buildup I’ve seen. Get the book.
Published in 1997, so written before that, is The Fourth Turning; What the Cycles of History Tell Us About America’s Next Rendezvous with Destiny. Here’s what authors William Strauss and Neil Howe say in their first chapter. “Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation and empire. Yet this time of trouble will bring seeds of social rebirth.” If you first think they are a couple of gypsy fortune tellers, their analysis of history will convince you otherwise. We have, on a regular basis gone through long cycles of Highs, Awakenings, Unraveling and Crisis. Our last crisis was the Great Depression and Second World War (though there doesn’t necessarily have to be a war) and we are due for another. Because that’s the way it happens as the generations roll along and interact with each other. Not to trivialize what they are saying, but if you, as a business person, can capture the market implications of the evolving social context, you might sell a bunch more. You need to read this one.
I’m in the middle of reading This Time is Different- Eight Centuries of Financial Folly. It was published late in 2009 and you can find it here. heir conclusion, of course, is that it isn’t different, and hardly ever is. They’ve been reasonable rigorous, so there’s a lot of data, charts, and explanation. But chapters 13-16 can be read on their own and will tell you all you need to know about our current economic and financial circumstances.
Tom Hayes’ Jump Point: How Network Culture is Revolutionizing Business(2008) is an easy, interesting read that will make you think about the future of advertising and promotion. The key point I took away from it is that our attention is becoming a valuable commodity. Here’s a link to it.
The Black Swan- The Impact of the Highly Improbable came out in 2007. Talk about good timing. Nassim Nicholas Taleb makes compelling arguments that so called highly improbable events aren’t improbable- they are just hard to imagine. This is relevant to markets, business, and investment and is particularly fascinating to read after our financial meltdown. It’s not an easy read. This guy is really smart and uses about twice as many words as he needs, but it’s worth it. Here’s the link.
“Disruptive Change- When Trying Harder is Part of the Problem.” Harvard Business Review, May 2002. Interestingly enough, trying harder is a problem when the business environment changes because of the tendency to do more of the same thing you’ve always done. Typically, those things are not the right things to do anymore. As I’ve written, this corresponds to my own experience doing turnaround work. You can get a copy at the HBR site if you want it.
CHANGE- Principles of Problem Formation and Problem Resolution. By Paul Watzlawick, John Weakland, and Richard Fisch (1974). These guys are academicians with an interest in how people perceive and solve problems. For somebody like me who’s done some work with financially troubled businesses, this is practically a bible. It’s only around 150 pages and doesn’t talk about a single business situation. But the insights it gives into why people behave the way they do in circumstances of stress and change are invaluable. You can get it here. Look, it’s still in print so it must offer some value.
Competitive Strategy- Techniques for Analyzing Industries and Competitors. By Michael E. Porter. First published in 1980, it’s been revised and is its 60th printing. The chapters on competitive strategy in emerging Industries, the transition to industry maturity, and competitive strategy in declining Industries still have something to offer. I think it’s safe to say that Professor Porter had never heard of action sports, but that makes his analysis all the more interesting to those of us who have been in the industry a while. I imagine you’ll recognize some of the trends and patterns he discusses. Take a look.
And if Porter doesn’t convince you that there’s nothing new under the sun in business cycles, read Edward Chancellor’s Devil Take the Hindmost: A History of Financial Speculation. Published in 1999, it will convince you that fundamentally, the internet bubble or the housing bubble was no different from the South Sea schemes of the early 18th century. The statistical concept of regression to the mean rules- in financial markets or industries. What goes up must, indeed, eventually come down. Buy it here.
Kellogg on Integrated Marketing. Edited by Dawn Iacobucci and Bobby Calder. Published in 2003 by John Wiley & Sons, Inc. This book was like a whack on the side of the head for me. Skip some of the chapters that go into extreme detail on some approaches to marketing and market research if you like. But when you read the chapters on how information how moved down the food chain, changing marketing and markets, you’ll say, like I did, “Hell, I knew all that- why didn’t I ever put it all together and do something about it?!”
Okay, here’s a really weird one. Bruce Catton, the noted Civil War historian, wrote a three volume centennial history of the Civil War. The second volume, called Terrible Swift Sword, was published in 1963. I’m kind of a Civil War nut, so I recommend all three volumes, but all I’d really like you to read is pages 308-321 on The Seven Days battle. If you think of Robert E. Lee as the entrepreneur who didn’t allow his preconceptions to limit his options and Union General in Chief McClellan as a CEO who was paralyzed by perception and fear, you have one of the best business stories I’ve ever read.
Relevance Lost- The Rise and Fall of Management Accounting.Written by H. Thomas Johnson and Robert S. Kaplan and published in 1987, it’s still relevant given all the creative corporate accounting we’re confronted with today.
It’s common for me to get requests for industry information. Sometimes it requires a simple answer I’m happy to provide. More often it’s along the lines of, “Can you please send me a breakdown of sales for surf, skate, snow by brand and country worldwide along with an analysis of all the retail channels they use?”
I politely explain that if I had that compiled in an easily accessible form, I’d be selling it for a whole lot of money and go on to provide them with some links that might help them do their own research. An expanded version of that list is below. If you’re in the industry, there may not be much you haven’t seen before. If you’re just learning about it, this could be a good place to start.
I’ve listed them in alphabetical order
Board Retailers Association
International Association of Skateboard Companies
National Ski Areas Association
NDP Group (Leisure Trends)
Ski Area Management
Snowsports Industries of America
Surf Industry Manufacturers Association
Here are links to the investor relations part of the web sites of public companies in the industry. Their public filings, press releases and occasional presentations can be good sources of information.
Abercrombie & Fitch (Hollister)
Amer Sports (Atomic, Salomon, Arcteryx, Nikita, Bonfire)
Billabong (Billabong, RVCA, Element, Sector 9)
Kering (Volcom, Electric)
Nike (Nike, Hurley)
Quiksilver (Quiksilver, Roxy, DC)
VF Industries (Vans, Reef, The North Face)