If you’re looking for a tool to compare your operation’s performance to typical and high-profit home improvement businesses, the North American Retail Hardware Association (NRHA) has what you need. The 2018 Cost of Doing Business Study is now available and can be purchased for $499 here. If you participated in the study, you will receive a copy of the study in the mail.
Compiled using financial data from approximately 1,000 independent home improvement stores in the U.S., the study sheds light on facts and figures that can help retailers make better business decisions to improve their bottom lines. Conducted by NRHA for more than 100 years, the Cost of Doing Business Study is divided into separate sections for hardware stores, home centers and lumberyards, giving readers a direct look at the data that affects them most.
Before diving into the study, take a moment to review a few important metrics that can help you evaluate your operation against typical and high-profit businesses.
Average Transaction Size
Understanding your average transaction size is fundamental for business owners. Your business’s average transaction size is the total sales over a period of time divided by the total number of transactions in that same period. Average transaction size is one of the three main ways retailers can grow their top-line sales, so understanding your specific transaction size data is critical to expanding profits and running your business effectively. Use the Cost of Doing Business Study to see where you stand.
Payroll is the total cost of owner and employee salaries, insurance payments and benefit plans. Finding the right balance between paying employees’ wages and maintaining a healthy profit is an important task for independent retailers. Business owners can compare their store’s payroll against industry averages by dividing payroll costs by net sales. Evaluating payroll on a regular basis and comparing your figures against industry averages is a key way to stay on top of your financials.
Gross Margin Return on Inventory (GMROI)
You can use your GMROI to determine what your margin is for every dollar you spend on products. To find your business’s GMROI, divide your gross margin dollar value by your at-cost inventory value, and then multiply that number by 100. This figure enables you to watch for slowing sales in products and departments. GMROI is a figure independent retailers can use to compare departments’ performance against one another at specific points in time, or across a span of time.