Proven Tactics to Grow Bottom Line Results After You Open a Dollar Store »
By rbhamil on May 2, 2009 in Tips/Steps For Success | 0 Comments
Achieving success after you open a dollar store business involves a relatively simple formula. The formula requires you to increase the number of sales transactions made in your store. As sales transaction numbers climb focus on increasing the size of the average sales transaction in your store. To this you blend continued focus on reducing the cost-of-goods-sold. In this article I present proven tactics to grow bottom line results after you open a dollar store. We will examine each component of this equation.
First let’s examine how to increase the number of sales transactions in your store. There are basically two ways this can be achieved. First you can increase the number of new shoppers who enters your store. If all other variables remaining unchanged, the more shoppers coming through the front door, the greater the number of sales transaction in your store. The second way to increase the number of sales transaction is if you increase the frequency with which existing customers return to your store. The more often they return the greater the number of purchases they will make. Let’s take an example. Let’s assume your average traffic is 200 visitors per day and you make 100 sales. For this example we’ll also assume the average sale in your store is $10.00. What if you could get an extra 50 people to enter your store each day? All things remaining equal, that should mean 25 extra sales in your store. 25 extra sales with a $10.00 average sales size equal $250.00 in extra sales per day or about $91,250.00 in added sales per year.
Next let’s examine increasing the average sale size. Now intuitively it makes sense that we will increase our total sales just by increasing the number of sales made. However if you open a dollar store and then take that approach you are leaving sales on the table. You are failing to focus effort on increasing the average size of your store sales. Increasing the average sales size requires that the number of items (or the total dollar value of sales if you are greater than $1.00 price point.) in the average sales transaction increase. For example, if your store completes 100 sales during an average day and you total sales for the day total $1,000.00, then your average sales transaction size is $10.00. What if you completed the same 100 sales, but your average transaction size increases by just $1.00? All of a sudden your total sales are $1,100. You’ve just increased your total store sales by a whopping $100.00 per day, or about $36,500.00 per year!
Increasing traffic and also increasing the size of your average sale should be enough to positively impact your bottom line results after you open a dollar store. The reality is they aren’t enough. You need one other important ingredient; lower cost-of-goods sold. In fairness, you are losing money if there aren’t continuous efforts focused on reducing all costs associated with your business. In fact this is so important that it should become either a strategic objective each year, or a part of your business plan, or both. Lowering the cost-of-goods-sold by even one-cent can have immense results. If you are selling at the dollar price point and total sales for the year were $365,000 with a 50-cent cost-of-goods-sold, what happens if you do reduce COGS by 1-cent? In our example you have a 50-cent COGS or $182,500 for the year. A 1-cent reduction means COGS would be reduced to $178,850. That’s an amazing $3,650.00 to the bottom line!
If you open a dollar store be sure to place emphasis on all three components discussed here. Each is a piece of the puzzle that can really pay huge dividends for your business. While each requires different actions, they must all receive your attention. Invest the time, effort and money to make them work for your business. Give it a try!
To your dollar store business success!
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