Tennis Specialty Retail Tip: Manage the Unexpected with Weekly KPI Reporting
In today’s economy, monthly financial reporting just isn’t current enough to manage the unexpected. You need weekly reports covering strategically selected key performance indicators — or KPIs — reporting actual performance compared to your budget objectives and last year’s actual performance.
Two of the most important questions we have learned to ask in our Business Assessments of retailers are:
- As an owner of a small to mid-size specialty retail business, are you using KPIs (or some similar scorecard metrics) to measure how your business actually is performing?
- If so, how frequently do you receive KPI reports?
KPIs are also called “critical success factors” and “scorecards,” and they are the most important financial and operational metrics used to measure the success of your business strategy and current business plan. The problem is, only a small percentage of sporting goods retailers use KPIs.
There don’t have to be many KPIs included in your weekly reports, but they need to be carefully selected to provide you and your staff with a current measure of the performance of your tennis retail business against your business strategy, your current budget objectives, including benchmarks, and last year’s actual performance.
Gaining a Weekly Advantage
We’ve talked to and interviewed scores of independent specialty retail storeowners about financial results and profitability. What we’ve found is that the best performing, higher profit independent specialty stores receive weekly reports covering KPIs such as:
- Revenue against plan
- Operating margin against plan
- Operating expenses against plan
- Inventory productivity against plan
- Gross margin return on inventory (GMROI)
- Net operating pre-tax profit against plan
Some of the high-profit specialty retailers we talked to also included in their weekly KPI reports revenue and operating margin contribution by individual sales associate.
The best resource to get started with selection of your KPIs for reporting is the TIA Cost of Doing Business–Tennis Retailers 2010 Report. Additional KPIs that you should consider for weekly reporting that can also be benchmarked to the TIA CODB report are:
- Gross margin by major product category against plan
- Tennis shoes
- Women’s apparel
- Men’s apparel
- Tennis balls
- Tennis accessories
- Junior tennis equipment
POS Systems and KPIs
Weekly reporting can actually be relatively easy to accomplish using the report capabilities of the Point of Sale systems available today, and particularly if your store’s accounting system is either integrated or compatible with the POS
Weekly reporting allows reviewing performance against plan with partners, co-owners and staff — and it also allows re-planning while there is still time to react effectively to changes in the local marketplace, the economy or any number of other factors that tend to pop up unexpectedly. Keep in mind, however, that weekly KPI reports do not replace your in-depth monthly financial reports that include a complete monthly and year-to-date income statement and balance sheet.
The specialty retail world is changing rapidly, and learning to manage the unexpected is becoming the new normal for many, if not most, tennis pro shops and specialty retail stores. The best tools at your disposal are a well-thought-out annual business plan, integrated point-of-sale and accounting system, strategically selected KPIs and weekly reporting … so you can manage the unexpected to the benefit of your specialty retail business.
Coming Up: Attaining “operational excellence.”
This is part of a series of retail tips presented by the Tennis Industry Association and written by the Gluskin Townley Group (gluskintownleygroup.com).