I hold a pretty tight line when it comes to spending money for business. Too many businesses I work with spend money on dumb dumb stuff. They put the cart in front of the horse, spending excess working capital on stuff that doesn’t move the topline.
A new fixture, a new desk for the office, a new point-of-purchase system, a new microwave so your employees’ food is heated faster, these are all things that may enhance your employee experience, but do they make your customers buy more? Probably not.
THE REAL WORLD RETAILING TAKEAWAY
You have to grow the topline in order to grow the bottom line.
I’m not really sure why so many business owners forget the basic tenet of business. Increased sales coupled with controlling expenses = greater profits. And greater profits = more money to spend on stuff.
So do yourself a favor and put your working capital toward building the topline. There’s only a couple ways to do this:
- Drive more traffic to your store. Set a goal that you’re going to acquire 10 new customers a week. That involves marketing. And there are a million ways to market your business. Find one that’s right for you. The only thing that’s stopping you is to not do it.
- Increase your average transaction. Increasing your average transaction per customer yields higher gross margin dollars with the same amount of work. Run a contest among your team offering rewards for increasing the transaction.
- Increase your number of transactions. This is known as conversion – and it means increasing the number of browsers you turn into buyers. It requires knowledge and supreme customer service.
I continue to look for those unique shopping experiences that couple great merchandise with great service in a great environment. If you offer all three, you’ll be on your way to increasing profits. But you have to make sure you’re spending your money in the right places in order to grow that topline.
Best to skip the new microwave and office desk and use the dollars for a marketing campaign. If you get the new customers in the door, then you can afford to buy all those other things plus more.
How are you investment spending?