Making Your P&L Work
The election is over and we finally - after nearly two years - know a little more about what the next four years will look like. Regardless of which side of the political fence you sit on, there are some things that you MUST expect that will affect your business. Depending on how you have set up your business, most of us will be looking at some type of tax increase in the coming months. You will also be paying more for your health insurance. This is not a criticism of the current administration, but they are the stated intentions in policy going forward.
Anyone who works with P&L sheets will know this, and after working with many P&L's over the last several years, I've recognized that there is a huge difference between fixed and variable costs. Variable costs are costs that increase and decrease as your sales fluctuate. So for instance, a commissioned sales person will either make more or less based upon what your actual sales are. Most fixed costs are, as their name suggests, fixed and not open to adjustment. This is not news to anyone reading this post.
But as some of the line items on your P&L increase, such as taxes and insurance, these will also be increases in your fixed costs. These will be costs that you will have to pay regardless of how your business is doing. The quickest way to lower fixed costs is to reduce your head count. However, and generally by doing so, you also reduce the innovation and services that your company can provide.
Let's step back to variable costs, because I want to emphasize the variable cost of advertising. Generally, there is a percentage of total revenue that is set aside for advertising expenses. This is where you can alter your P&L with effective use of your dollars by targeting the right audience where SHE shops!
Traditional forms of advertising, such as TV, newspaper, direct mail campaigns, and radio are very expensive and there is typically no way to measure the success of using this type of media. The Internet provides ways to maximize your exposure to that precious end customer and do it in a way that drastically affects your P&L, simply because advertising online is much less expensive, and it also provides a way to track what is working.
Timed email blasts that correspond with a special event will get attention as long as you do not overdo it and you are truly doing something special. Sending recommendations from your staff to their customer base through email is an extremely beneficial tool that will bring immediate results! First off, you are telling that customer that you are thinking of her, and regardless if she takes the suggestion, she might give some thought about a home furnishing need that she has. So far, you won't have spent a dime on advertising - you're just using the resources that you have.
Teaming with third party sites to promote your brand is also a very efficient tool and very inexpensive. Generally, sites that do e-commerce or some type of referral program know exactly how to reach your targeted customer. By partnering up, you now have the ability to bring new consumers to your door with the chance that they will become lifelong patrons. Typically, you can also get real-time analytics that show exactly what your efforts are producing.
We all know that generating traffic is the toughest thing that a retailer can do, but you can do it, and do it in a cost effective and measured way using the tool that she is using when she begins her buying process: the web!