How comfortable are you with understanding the metrics and financial figures used in your business’s accounting files and financial statements?
If you have trouble differentiating your defensive interval from your EBIT, you’re definitely not alone.
Take a moment to review five key figures that can help you take control of your operation’s finances.
For more financial information you can use to benchmark your business, dive into the 2018 Cost of Doing Business Study. This annual resource provides an overview of the facts and figures retailers can use to compare their business to typical and high-profit counterparts.
Review upcoming issues of Hardware Retailing for information on how you can contribute to the 2019 Cost of Doing Business Study.
1. Net Operating Profits
This figure represents the money you put in your pocket every month and provides a clear way to measure the overall health of your operation. The typical hardware store’s net operating profit in 2018 was 3.6 percent, while high-performance operations saw a 9.1 percent rate.
2. Gross Margin Return on Investment
This figure reveals how much money you earn for each dollar you invest and is a great way to evaluate products, categories or your overall inventory. Any figure above 100 means you are earning more than you have invested. Average hardware stores last year saw a rate of 169.5 percent, while high-profit stores observed 194.3 percent.
3. Transaction Size
Even incremental increases in this metric can lead to better overall performance. Increasing the average transaction size at your operation is one of the most direct ways to boost profits. According to last year’s research, typical hardware stores saw $22 per customer, and high-profit stores sold $23 per customer.
4. Payroll Expense
Your operation’s payroll expenses are likely one of its biggest expenditures. Because of its overall size, even small changes in payroll can have a major impact on your operation. The average hardware store’s payroll expense was nearly 22 percent in 2018, and high-profit stores observed a rate of 18.7 percent.
5. Customer Counts
This figure represents how successful your marketing and advertising efforts are in drawing new customers to your business. Observing customer counts gives you the information you need to better manage other aspects of your business.