Fall 2021Hardlines Strategies

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Budgeting for Profit NHPA’s Dan Tratensek Provides Best Practices and Insights

While some factors remain outside of your control, you can still create a budget that plans for profit. Start by gaining an understanding of your budget: Take a hard look at your financial statements to find the numbers you want to improve. Then, establish specific goals for how you can improve those numbers. As you execute your plan, you’ll want to track your progress and make adjustments. Dan Tratensek, North American Hardware and Paint Association (NHPA) chief operating officer, provided experienced many once-in- a-lifetime factors during the past 18 months, which can make budgeting for your business a challenge. W e have

KPIs where high-performing stores consistently outperform the rest: payroll expenses, operational expenses and sales per square foot. Here are some suggestions to tackle each of these KPIs. Payroll Expenses • Scheduling efficiency . Use your POS data to help determine your busy times of day and how many employees you need during those times. Once you adjust schedules, you may also be able to eliminate expensive overtime or overstaffing. • Training . Turnover is costly to a company. Improve employee retention by refocusing your efforts on training. Training will give employees more confidence to do their jobs and give them opportunities to move up in the company. Operational Expenses • Service providers. If you haven’t audited your service providers recently, it may be time to see how you can save money. For example, shop around for a lower price on insurance or cheaper trash service.

Understanding Your Budget Before you begin to budget for the future, it’s important that you become familiar with your business’s past performance. This starts with a hard look at your income statement and balance sheet. Next, you’ll want to gain an understanding of what each of these reports reveals. Establish a Benchmark, Then Examine Your KPIs You’ll want to create and regularly review a manageable set of key profit indicators (KPIs) to gauge your operation’s performance. There are many KPIs you can use, including inventory efficiency ratios, employee productivity numbers and gross margin indicators. NHPA’s annual Cost of Doing Business Study can help you establish a baseline to measure your KPIs. The study consistently shows that one of the big differences between an average performing retail operation and a high-profit one is the way they handle their operational details. There are three

the following insights ahead of his presentation at the Fall Market.

4 Fall 2021 • Hardlines Strategies