Retail Blog

Owning a retail business can be exciting and rewarding, but of course, plenty of hard work. Keeping close tabs on financial information is vitally important in making it through the first year and beyond. Two topics important to the financial health of your business are analyzing your return on investment (ROI) in advertising and regularly watching your profits and losses.

Most business owners understand the importance of creating brand recognition through a comprehensive advertising campaign. But choose your advertising outlets carefully or you can quickly and easily spend a significant part of your budget just on advertising and perhaps in ways that are not productive or profitable.

Know Your Customer
When creating an advertising campaign, you must first determine which outlets reach a large portion of your target market. But how do you know? Start by asking your customers. Ask what papers they read regularly. Are there television programs they watch most often? What radio stations they listen to, etc. Find out from the media representatives what their demographics are including age groups, income levels, etc. When you select your modes of advertising, don’t be afraid to ask for an “out” in your contract. You might be surprised to find out how many reps are willing to put this simple clause into your agreement. It saves time, money and haggling should you find yourself in a position where you are not getting a healthy ROI.

Track Advertising ROI Religiously
Whenever possible, find some way to track your advertising. Coupons are the simplest way. Similarly, including promotional codes in your advertising or copy such as, “Mention this ad and get 10% off of your purchase of $100 or more” can be an effective way to track the return on your advertising dollars. Asking customers where they heard about you is an adequate, though least scientific of all methods, as many people cannot precisely recall where they saw your ad.

Once you gather this information, find some way to keep a record of the results. If you use a Point of Sale system, you can devise codes to put in the “promo” field. You can then regularly run a report that lists all of the codes you entered. Or for a “low-tech” method, you can keep a simple tally on a sheet of paper. List each ad and then keep track of each customer, which ad they saw and how much they spent. You are then able to analyze whether the money you spent on, for example, television ads is bringing people into your store and whether their purchases are making enough to warrant continuing that form of advertising. It may appear as though you are getting more customers in with that commercial, but until you see how much they are spending, it may not be clear as to whether that money is being well spent.

Never Stop Watching the Bottom Line
Check your profits and losses daily, weekly, monthly and yearly! If you find that your daily losses are outweighing your profits, you may be able to make immediate changes to help that bottom line. You can begin by cutting out items that might not be imperative, like having your windows professionally washed every month. Many new businesses find themselves in the red for the first year or two, but consistently having business losses dwarfing your profits might be a clue to re-evaluate whether your customers are really interested in what you have to offer or if you might need to shift your product offering.

We are in business to service our customers, but we are also in business to make money. Keep close tabs on the financials of your business and it can help you keep your business healthy!