After the pandemic

How did you do and what is next?

As you read this article it has been some 30 months since the Covid 19 pandemic began to change the way every human performed the majority of activities within their life. Every store owner, regardless of what products and services offered, experienced changes starting with the initial shut down in March 2020.

There were many businesses, such as restaurants, dry cleaners, and stores selling business attire, that suffered tremendously as there was little need for what they offered, or the idea of being around other people caused them to hit rock bottom.
And then there were other businesses, like yours, that found these changes to personal activities to provide a boom to sales. Bicycle shops, hobby stores, pet shops, furniture and home furnishing stores, and quilting stores that as people were isolated or now working from home received a big boost to their sales.

While anticipating we are on the backside of the pandemic, it is appropriate to ask, “how did you do?” Also appropriate to ask of your business is, “What comes next?”
While expecting the majority of answers to be that your business had an increase in sales, it is the question of profits and the controlling of expenses that should be examined. Just because the sales increase, there is no guarantee that there will be an increase in profits.

If, as an owner, you want to be able to say that your business has done better, there are several components that should be examined. The first place to look is the gross margin, stated as a percentage, on your income statement. What was your gross margin in 2018 or 2019? Then look at your gross margin for 2020, 2021 and for the year 2022 to date.

Starting in the pandemic, and still continuing, there has been a shortage of product. People are not price shopping; they are just glad they can find the item they want or at least something similar to what they want. There is little need for a retailer to be offering sale prices.

When new inventory arrives, and the cost is more than the same item you have on your sales floor, are you increasing the price of the inventory you already have on hand? Or, are you selling the existing inventory based on the price you paid for it? You may be doing so because you think that is being fair to your customers; but remember your operating expenses have been increasing just as the cost of inventory has been increasing.

Using this free online calculator, multi-year analysis, look at your gross margin for 2019, 2020, 2021, and 2022 year to date. Has there been a fluctuation? If so, is there a valid reason for the fluctuation?

Now look at the expense section. However, we are suggesting you use this free online calculator, logical profits and loss statement, to group your expenses so that you can easily perform this exercise. You will see that everything related to advertising is in one group, as are all the payroll, occupancy, and then all other operating expenses. We will ask the question for each of these as we did for the gross margin. For each of the past three years, and this year to date, look at the expenses, as a percentage of sales, instead of looking at the dollar amount. How has your store been over this time period when looking at the percentages?

This multi-step exercise is designed to determine how well you did as an owner. Logic would imply that a store should have, at a minimum, maintained their gross margin percentage over this time period. And while we are all seeing an increase in expenses, the business that is not keeping them in line, percentage wise, is a business that is slowly, but surely, becoming less profitable if not losing money.

The business that can say they have accomplished these things is one that has taken advantage of the changes in business that the pandemic has placed upon their business.

The business owner that thinks they have become a better operator during the pandemic because there has been an increase in sales is not seeing the entire picture. For the majority of shops, the increase in sales has come because of people staying home during the pandemic and their wanting something to do to occupy their time. Odd as it may sound, the industry has been the beneficiary of the side effects of the pandemic.

While not a medical professional, there are signs that the pandemic is becoming an endemic; much like the flu and its annual effect on the public. If that trend continues it would appear that the activities of the public could return to a pre-2020 format.
What does that mean for you and your business? Will the past 30 months become a memory when looking at the financial statement for this time period? While not wanting to appear morbid, will this simply be an event that occurred and that you watched the sales in your business increase and then fade back to pre-pandemic levels?

Instead, have you been observing and studying the new habits of your existing customer? With every change in human behavior, there is a challenge and there is an opportunity for a business to adapt to this changed customer.

We invite you to consider looking at your customer and your business in a different light. Most look at the business and think about “what” they sell. To grow the business requires finding more people who want to purchase what you sell, as well as being able to sell more of “what you sell” to your existing customers.

The suggestion comes from a study in the banking industry. The results shows that if a person “purchased” one service from a bank (checking account, savings account, certificate of deposit, safe deposit box, car loan, mortgage, home improvement loan, line of credit, etc.) there was a 90% chance the person will wind up taking their business to another bank.

However, if that same person purchases five or more services from the bank, there is a 90% chance they will not take their business elsewhere.

A business that focuses on the “who” has a better chance of remaining relevant to the customer than the business that focuses on “what” they sell. Focusing on the “who” instead of the “what” means the business will change the products and services offered based on their changing customer.

In our lifetime, we have not seen as much change in a short period as we have in the past 30 months. Your store has been the beneficiary of an unfortunate and tragic illness that has struck the world. As this illness subsides, the questions we ask are, “What have you learned from the past 30 months?” and, “How are you going to change your business so that the growth you have experienced will continue?”

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This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 128, Dardanelle, AR. 72834. Phone 727-823-7205. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.