Recently On My Email Blast I Sent Out An Email Titled "Your Store Is Nothing But Numbers": David Geller
A store manger emailed me and asked some questions. Here's the managers question and my response below (names have been removed to protect the innocent).This is key to making a store profitable and increase sales at a LOW or almost ZERO cost.
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He wrote:
Excellent article! As the manager here at our store, we discuss these things,
but not necessarily “all” of these things together. This will be a good guide to follow at our next management meeting.
I wondered if you could address payroll costs and percentages. That is an area we are always concerned about.
I also worry about the hidden cost of turnover, and the time and effort that goes into training new employees.
Your thoughts so I could add that to this outline for discussion???
Thank you!
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My response:
The Jewelers of America cost of doing business survey has what others spend as a percentage of sales.
You can get it here:
http://www.jewelers.org/benefits/business/cost-of-doing-business
PAYROLL:
1. I take jewelers’ wages OUT of payroll, they are a cost of the shop.
That leaves IN PAYROLL:
- admin costs
- owners pay
- sales staff wages
I assume your store does over a million in sales. If so, total sales staff pay should be about 10% of total store sales. Their individual pay should also be 10% of their total sales.
In general, sales staff should cost you anywhere between 8 to 13% of total sales.
If they cost as low as 8% they are very EFFICIENT (yea!)
If they cost about 14% of their sales, they are INEFFICIENT :-(
When calculating, it has to be all on sales activity (yes this includes repairs, custom design and watch batteries)
If Mary is a full time sales person and packages up the Fedex boxes BUT she can drop what she's doing to wait on a customer, that’s not admin time, she's 100% selling.
But if the bookkeeper spends 1/2 her time in the office and is paid $40,000 a year, then to figure how well she does in selling you'd divide just the selling costs of her pay ($20,000 is 50% of her total pay) against her sales.
If she sold in a year $220,000 we divide her cost of $20,000 to sell by her sales of $220,000, she costs you 9% WHEN SHE SELLS, very good.
TOTAL PAYROLL:
In a store like yours, take out the owners pay and leave in the managers, sales staff and admin, and that number in a store can range from 17% to 25%. High volume store, over 4-5 million payroll w/out the jeweler and owner can be 17-23%, give or take. I assume you have a commission system? If so, can you tell me about it?
TURNOVER COSTS:
I don't look at THAT number. But some people have said:
1. Turnover can cost half of their salary if they leave within a year.
2. Can't even worry about them for the first 90 day training period.
I look at what they cost if they stink!
I had 5 sales people and paid 10% commission-10% of what they sold, less on diamonds and less if they discounted excessively.
15 years ago at 10% commission, in a store doing 75% of its sales in custom in repair, here were their W-2's (round numbers) from 15 years ago:
$32,000
$41,000
$44,000 (this one only worked 4 days a week)
$55,000
$61,000 (this one bought the store from me)
Because each one got 10%, it is easy to see how much they SOLD:
$320,000
$410,000
$444,000
$550,000
$610,000
Let’s talk about the first one who sold $320,000 in sales, and was paid $32,000. She had been a manager at a Sterling jewelry store chain. Should have been great? Not so.
The part timer making $44,000 had worked at a bank, she loved jewelry but that was her only jewelry experience.
We had twice monthly sales meetings for an hour, and she became # 1 until she started part time and the guy came on board who made $61,000
So I gave extra coaching to the $32,000 a year sales person to no avail and finally let her go. Why?
Simple: look at the DIFFERENCE in sales between her sales of $320,000 and the number two person at $410,000.
She cost me $90,000 in LOST sales. That’s a REAL COST. So I let that person go.
It was funny, when I let her go the sales staff (on a 100% commission) said "please don't replace her, we'll take up the slack."
I didn't and they did take up the slack.
That's how I look at costs of a sales person leaving. If you pay them well and train them they will stay.
TRAINING:
We had 1 hour meetings every other friday morning. We divided the sales meeting into 4 fifteen minute sessions:
1. Our price book
We had every one have a price book, brought out a white writing board for illustrations and started with page 1 of my book. We went over HOW we do the work, why we charge this amount, how to sell it and what to say to customers with a price objection. We stopped at 15 minutes, and picked up at the next page at the next meeting.
2. Product Knowledge
We let the STAFF sign up to teach the STAFF about a different product at each meeting. They would tell us where (Tanzanite as an example)a product comes from, its description, rarity, where its mined, its features (its a soft stone, not great for rings). If we didn't have any they could get them in on memo. Then they had to SELL one to someone at the meeting. Each meeting was a different stone or maybe about the different kinds of movements in watches, how pearls are farmed,etc.
3. Salesmanship
We used Harry Friedman's book "No Thanks, I'm Just looking" and went over about 15-20 pages in a chapter or awhole chapter at a meeting, including:
a) getting ready for opening each morning.
b) schmoozing and greeting the customer.
c) the presentation
d) handling objections
e) closing the sales.
f) add ons. Much more than I typed.
Here's the web address for the book, but Harry now has sales training ONLINE and its fabulous:
Book: http://www.thefriedmangroup.com/no_thanks.htm
Web sales training: https://www.youtube.com/watch?v=Vzpo7zorW3I&hd=1&wide
4. Store news
Not store complaining. Store news. What's happening this week in advertising, new products we got in, John's wife had a baby, sales are only $10,000 away from our goal, here are bonus checks for last month, etc.
When I went to a Harry Friedman seminar in 1991, I installed everything he said to do. Commissions, sales training, tracking closing ratios, weekly private meetings, average sale. Sales that year (Only started Harry's stuff in June) went up 35%.
Speaking of closing ratios, do you track how many people out of ten who look in the case actually BUY from the case? You should. Inventory is the store's biggest investment.
Average jewelry store in America sells only 2.5 or 3 people out of 10 who come in and look in the case. If your store closes 3 out of 10, and you could get just ONE more person to buy and sell 4 out of 10, that would be a 33% increase in sales without any additional advertising being spent. That’s huge. If your average sale is $400 for every 3 who buy that’s $1200 in sales
If you could go to 4 out of 10 that would be $1600 in sales!. That’s a 33% increase in sales.
Now if you add to that RAISING your average sale from $400 to $450 (or get a $50 add on) and you now sell 4 out of 10 over now total sales for every 10 people who came in, sales would go from $1200 to a whopping $1800. That’s a 50% increase in total store sales for just getting ONE more person to buy a $50 higher ticket item. Huge, Huge, Huge.
Don't worry about what it costs if they leave.
Worry about what it costs IF THEY STAY!!!!
Feel free to share this, and I'm going to remove your identification stuff and pass this around. You asked some excellent questions.
Hope that helps,
David
David Geller
(404) 255-9565
