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We will never have enough staff, until we…

The amount of money available to pay wages & wage benefits is in direct proportion to your level of sales volume. The fact is, “We will never have enough staff, until we sell enough stuff.”

“Don’t tell the marketing people I said this but, sales is a subset of marketing” said Dave Mulbarger, VP of Sales and my former boss of years ago. We too often take on the attitude that lack of sales is a marketing problem rather than a selling problem and vice-versa. The reality is that both do carry responsibility, and the greater of that responsibility lies with the marketing function since sales is a subset of marketing. However, accepting responsibility and placing blame correctly does not solve our problem. What we need is a strategy to apply to sell enough stuff.

On average, the highest profit garden centers invest 28% of sales in wages & wage benefits, according to the annual P&L Study conducted by Steve Bailey, my colleague and financial consultant for The Garden Center Group.(Click to read article in Today’s Garden Center.) This means that for ever $100 in sales volume they earned $28 to pay for wages & wage benefits.

Most owners and managers have the perspective that they staff the store and hope to sell enough stuff to cover wages. This is a failing mindset. The correct perspective is that you provide service to your customers in a significantly different way in order to sell the level of stuff necessary to pay your profit, cost of goods, operating expenses, then wages & wage benefits. By operating with this mindset and perspective our actions soon follow. We market differently, we put customers first over taking care of our stuff, and as a result, sales increase before wages do. Soon there is more money available to add new people, pay based on performance, and to reward our associates for their most excellent contribution.

One of my clientsin the P&L Study brought in 2007 EBITDA profit of 10% with wages & wage benefits of only 18%. How did they do this? First of all, they set about a course to develop a “customer first” mindset, and resulting company culture. They didn’t have to do anything else. The wages came in where they did because they focused on the customer first, and helped them buy a lot of stuff. The extra 10% that was saved in wages & wage benefits would have dropped to the bottom line, except for the fact that this particular garden center’s operating expenses are excessive due to some extenuating circumstances. Necessity was the mother of invention. They had the choice to accept lower profits, or to change their mindset and focus to the customer.

Imagine what you could do in 2009 if you could sell enough stuff! Now, let’s get to work on it. Click here to get in touch today.

One Response

  1. Wow! Sid, if you don’t mind, we are going to take one sentence from this blog entry and focus one weekly staff meeting entirely on it. We’ll start with “PROVIDE SERVICE TO YOUR CUSTOMER” Then we’ll move on to “IN A SIGNIFICANTLY DIFFERENT WAY”. Then we’ll talk about “SELL THE LEVEL OF STUFF NECESSARY”, and ” PAY YOUR PROFIT”, “COST OF GOODS,” OPERATING EXPENSES”, and finish with “WAGES AND WAGE BENEFITS.”

    Another meeting could be developed entirely around the word, “THEN…” I think we are beginning to understand the concept of “pay yourself first” where it comes to personal financial planning, but to put profit first before COGs, expenses and wages doesn’t come easily to us. Thanks for the inspiration!

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