Shop Talk: Practical Answers for tough business questions.
Question: I know you have been in business a long time, but I am curious about your early years. Can you tell me what your annual sales and your sales per square foot were your first year or two? Did you see a gradual or sudden increase in sales over those first few years?
Answer: We opened our doors in mid-November 1991, and our sales those first six weeks were more than $50,000. This blew my sales projections to the moon! I attribute this success to a few factors: the time of year, the fact that we had been advertising our store for more than three years and customers were ready, and the great product mix we offered that was not available elsewhere in our region (thanks to my business partner’s choices).
In that first full year, we had sales of $150, 000. Our sales per square foot were approximately $62 (sales divided by square feet of selling area). The next two years we saw tremendous growth, with sales doubling each year. By the end of 1994, our sales per square foot were more than $350. After that, the percentage increase slowed somewhat—we lost our lease, had to relocate, and had to start rebuilding sales again in our new location.
It is important to consider many factors in evaluating your business. Sales and annual growth are one part of the formula, but you can have great sales and still not have a profitable business. Instead of just focusing on sales, be sure to take into account that your revenue needs to be in appropriate balance with the cost of your inventory and other monthly expenses to have a profit on the bottom line.
First published in Vol. 27 No. 4 of Retailing Insight. © 2013 Continuity Publishing Inc. All rights reserved.