10 Simple Money-Saving Tips for Music Retailers
Whether the economy is strong or sluggish, it’s wise to keep a fiscal tight rein on your business. This will protect you during downturns and maximize your profitability in more stable times. Establishing a fiscally sound operation requires simple and long-term changes, but rest assured: There are steps you can take today to get started. Eat the elephant one bite at a time, so to speak.
1. Adopt an austerity mentality, where every penny counts. In his book “Retail Truths: The Unconventional Wisdom of Retailing,” Chip Averwater mentions that a retailer’s net profit after all expenses is typically 1–3 percent of sales. Every missed detail comes directly off the bottom line. There are no sacred cows when you’re cutting expenses. Be as objective as possible, and disallow “we’ve always done it that way” as a rationale. Do the math. Focus on real data, not your preferences, hopes and dreams. Then, determine to get it right, starting now. This mentality starts at the top, but it’s important to get total buy-in from your staff, so they know and understand your goals.
2. Take a long, hard look at your store hours. Does your company open at 9 a.m., six days a week (because it’s always opened at 9 a.m., six days a week) but never do any substantial business until 10 or 11? If so, consider changing your store hours. Look at your sales per hour and when nearby stores open. Could you have a smaller staff at certain times without customer service suffering? Could you have shorter hours on Saturday or during the summer? Could you offer a 24/7 hotline for emergencies and appointment-only times outside of normal business hours? How can you lower your payroll cost and still offer the same level of customer service?
3. Watch your utility bill. This expense adds up over time. Retail financial guru Alan Friedman maintains that every extra dollar of overhead saved means $3 to $4 less revenue you need to stay afloat. So, here are some easy-to-implement, money-saving changes:
Check your thermostat. Still, be aware that raising or lowering the thermostat more than 5 degrees from your desired daytime temperatures may put more wear on your HVAC units, costing you more in the long run. Use a timer to set your thermostat, so it’s done automatically.
Change your air filters often. This keeps your heating and cooling system working at its best.
Ceiling fans are inexpensive to install and can substantially lower your HVAC costs. Our monthly electric bill dropped by more than 20 percent when we installed fans in our showroom.
Add air locks to your doors. This will also help with temperature and humidity control.
Check your hot-water heater. Setting the temperature too high is not only costly but also unsafe if young children turn on the faucet without supervision. I’d recommend a temperature setting of 120 to 125 degrees. Each 10-degree reduction in temperature setting will result in a 3- to 5-percent savings in energy costs. (A longer-term goal might be to install a point-of-use water heater, which runs only when hot water is used.)
Use a clock timer instead of a light sensor for your outdoor signage. A light sensor may turn your lights on when the sun goes behind the clouds. A clock timer is inexpensive and easy to install. A seven-day time clock will help adjust your lights, HVAC and hot water heater while the store is closed, as well.
4. Review your credit card processing fees. In 2011, new laws regarding credit card processing went into effect and may have changed your fee structure. Do your front-line employees know what transactions are the most and least costly for your business? Each processing company has its own fee structure. Familiarize yourself with it, and keep your staff informed.
Our former card processor charged more for debit transactions less than $30 than it did for credit transactions, so we ran all transactions less than $30 as credit. Our current processor charges us more for any credit transaction, so now we run as many as we can as debit.
Fees are usually based on the number of transactions processed per month and the size of an average transaction. Any change in your number of transactions, gross sales or average transaction dollars can mean a change in your fee structure. Check your monthly reports carefully, and don’t be afraid to renegotiate.
Invest in a mobile swiper, such as Square, so cards can be run outside of your store. This will save you from having to call customers whose card numbers were written down incorrectly or declined.
5. Check every accounts-payable invoice carefully. Often, one person (i.e., your buyer) negotiates with suppliers, but someone else handles your invoices. Not to mention your AP staff may not know the details of everything your buyer has negotiated. So, take a closer look.
Check every invoice for pricing errors, incorrect terms and so on. Check your nets carefully. Many of our suppliers have commented that we’re one of very few companies that check up on them and make sure we are billed correctly every time. That’s a shame. If a supplier is running a special or if your discount level changes, the supplier’s computer that generates your invoices may not be aware of your deal. We recently ordered some instruments at our MEA Convention. The invoice didn’t reflect the extra show discount, and we were erroneously charged freight. A simple phone call resolved the issue. We got credit for erroneous charges—more than $300.)
Check your statements carefully. You may get automatically generated finance charges on invoices for a number of reasons: invoices awaiting credits, slower-than-usual post office delivery times and incorrect terms. We generally don’t pay for items that were shipped incorrectly (and that includes the applicable freight charges) or that we know will be returned. We normally short-pay and apply the credit to the invoice balance. While suppliers might not like this approach, it makes little financial sense for us to pay in full and wait—sometimes weeks—for credits. This also seems to have a “magical” effect on the length of time it takes to get the credit.
Check your price tags regularly. Many vendors change their prices twice a year, and if you don’t update your prices regularly, you may find your margins slipping away. We put price tags on the back of each item. It’s proven that when customers actually pick something up to look at it, the chances of them keeping it are higher.
6. Monitor your freight charges. Some companies offer free freight for shipping to schools, others for shipping to your store. Look for overcharges that should be addressed with the supplier.
We received two UPS shipments from the same manufacturer one week apart. Each shipment contained two trumpets, and all four instruments were exactly the same model. The freight on one shipment was $16.43, and the other was $24.14—47 percent more! Soon after, we received a UPS shipment from the same manufacturer that contained only one trumpet, and the freight charge was $16.46. A phone call to the manufacturer resulted in almost $20 in credits for excess charges.
One of our publishers sent us catalogs to distribute at our MEA Convention, along with a few items we’d ordered. The freight charges came to $22.72, even though our actual order could have been sent first-class mail for only a few dollars. This time, a phone call resulted in a credit for the entire $22.72. (We love our suppliers!)
7. Keep track of your vehicle maintenance. Doing timely oil changes, rotating tires and changing the air filter regularly will keep your vehicles running longer. A vehicle breakdown is costly and can also cost you business if you miss an appointment, parent program or other important event.
8. Keep your repair department from being a drain on your pocketbook. Keep track of serial numbers on all repairs. If an instrument comes in for repair and the account isn’t paid up, keep the instrument until the account is current. If the instrument is still under a manufacturer’s warranty, you may be able to get parts at no charge from the manufacturer—and may even get reimbursed for some of the labor costs. This varies by manufacturer, but it’s always worth asking.
If you have repair subcontractors, buy parts for them. Chances are, you can get the parts cheaper than they can. And if they pay more than you would, they are charging you more, too.
If your repairmen are calling customers, they’re spending time doing a task almost anyone could do. Let them repair horns, and let others do the calling.
9. Eliminate unnecessary SKUs. Offering too many options causes customer confusion, and when customers get confused, they buy the cheapest option—not necessarily the best for your bottom line. Adopting a good-better-best strategy with small goods (e.g., reeds) will let you keep your inventory lower and still be able to have the items your customers need most. It also helps with up-selling. Use signage to educate and differentiate. Don’t be afraid to say, “… but we can order it for you and get it quickly.”
10. Keep track of inventory. Do inventory counts regularly, so you know exactly what you have and how long it’s been sitting there. Don’t be afraid to blow out items that aren’t moving, as older inventory costs money every day it’s in your store. Sell off excess inventory to generate cash you can use to buy what will sell. Keep a calendar of special events, so you can order in time and not have to pay expedited shipping. Mark your calendar with return-by dates, so inventory that doesn’t sell can be returned in time.
Above all, be creative. Encourage input from your employees, as they may have great money-saving ideas. And keep the customer in mind. The changes you make must never have a negative effect on your customers’ experience. Quite the opposite; by cutting expenses, you should be able to enhance your customers’ experience by being more able to meet their needs.