The Cool Factor

Furniture—it’s literally the reason we’re all here. Whether we make it, sell it, source it, design it, or offer services to the people who do all of that or write about the people who do all of that, we’re all in it together.

No matter which report you read or pundit you listen to, everyone agrees, the furniture industry has rounded the corner and is emerging from the economic woods. Consumer confidence is up and that ubiquitous phrase—cautious optimism—has changed to just optimism.

RetailerNOW talked to a retailer and two manufacturers about furniture, the industry and their businesses.

NAHFA member Alderman Maynard is vice president and chief sales officer for Maynard’s Home Furnishings, which was founded in 1947 in Belton, S.C. Maynard’s carries medium to medium-high price points and Maynard says they’re a destination shop. “People travel about 30 miles to see us,” he says. “We’ve always said we have to give them something extra so they’ll continue to travel that far for furniture.”

Maynard says his store achieves that goal through exceptional customer service, great looking showrooms and talented employees. Maynard says most employees have been with the company for about 13 years and that plays a key role in the level of service the retailer offers.

When it comes to dealing with vendors or manufacturers, Maynard learned quickly that this is a relationship industry. “A good vendor partner for me is someone who is open to my ideas of promotions and who is willing to work with me on growing both of our businesses. A good vendor rep is priority number one. Also, no matter how large the vendor is, I’d like to be able to pick up the phone and talk to the president with no problems. We don’t want to be just another number for a vendor, but rather someone who is valued as a business partner.”

Maynard believes wholeheartedly that a good sales rep is critical and says one of the biggest problems is the bad reps. Since his goal is to give his customers the best customer service possible, he expects the same from his sales reps, and those who aren’t able to follow through lose his business.

Being a third-generation retailer, Maynard has seen improvements in the industry during his time. “Some of the decreased lead times we’re seeing are almost unbelievable,” he says. “And I’m not just referring to warehoused imported goods out of High Point. We’re seeing incredible lead times on some domestically made custom-ordered upholstery. These are the lines that my sales consultants are leaning toward…with good reason!”

Maynard says he doesn’t have a product hot list for 2015—he’s just looking for lines that can help him increase margin. “We’re not a ‘trendy type store’,” he says. “We’ll normally wait a market or two on things that we deem “trendy” to see if they have staying power.”

Maynard shops High Point during pre-market and the Atlanta market.

As Maynard observes, this is a relationship industry. Learning more about the other players is important and learning to see things from their side of the table is insightful. So it’s no surprise that manufacturers are also positive about 2015.

Bryan Edwards, national sales manager for Aspenhome says with inventories going down and prices stabilizing there are more consistent fluctuations in the economy rather than the huge ups and downs the industry has endured the last five to seven years.

He’s also optimistic about the consumer. “Millennials have different style preferences and priorities compared to my generation (boomers),” he says. “They have a myriad of places to shop—brick-and-mortar, online, and (increasingly) hybrids. Furniture Furniture has never been more en vogue (in italics) and it has a cool factor I haven’t seen in my 30 years. It is a great time to be in the furniture business but change is here.”

Aspenhome has grown from a small, family-owned home entertainment company to a full-line furniture company that offers bedroom, dining, home office, home entertainment and occasional. The Phoenix-based company has received seven Pinnacle awards for design.

Edwards says Aspenhome furniture designers get their inspiration from “literally everywhere.” From the Consumer Electronics Show in Las Vegas and Maison & Objet to home furnishings websites and retail stores.

Early on the company realized the importance of paying attention to technology—and attending the Consumer Electronics Show. “We started in home entertainment 35 years ago,” Edwards says. “It is in our DNA.”

Despite Aspenhome’s commitment to staying ahead of the technology trends, Edwards says “staying on the forefront of innovative function in furniture without it becoming obsolete in three years” keeps him awake at night.

The company doesn’t have much to fear though—Aspenhome has successfully blended technology and functionality into its furniture designs. For example, many beds have built-in lamp assist (which lets you control bedside lighting with the push of a button on the bed), AC outlets and two large cedar-lined storage drawers underneath. “Most likely, 10 years ago your bed did not offer this,” Edwards said.

Aspenhome is focusing on woods—like walnut, mindi (white cedar), mango and oak—that show the character of the tree with a more open grain. The company rolls out anywhere from six to eight new collections each year. Mid-century modern is on trend this year.

When it comes to working with its retailer partners, Edwards says customers keep coming back because of “people, product and process.”

People fit in this mix by way of the exceptional customer service at Aspenhome and the in-house marketing support for retailers, which includes everything from high-res videos and images to catalogs, tear sheets and point-of-purchase materials on every product.

The innovative product is almost self-explanatory, but aside from the tech-friendly designs, the company offers solid wood bedrooms at price points retailers appreciate.

Having great people and product doesn’t mean anything if you can’t deliver; Aspenhome invests in logistics that let it support customers with door-to-door service with its mixed container warehouse program and its U.S. distribution center.

Tim Ussery, executive vice president of sales and Roy Yates, chief merchandising officer for Standard Furniture are also optimistic about 2015.

“We are pleased with our growth over the last three years,” Ussery said. “We’re looking forward both optimistically and conservatively aggressive in 2015. We take our business evaluation one market at a time, and one quarter at a time.”

Standard is a family-owned, Alabama-based manufacturer and distributor of casegoods. As one of the largest U.S. manufacturers, its product categories include bedroom, dining, occasional, entertainment and youth. It introduces 25 to 40 new product groups at High Point and Las Vegas markets.

Yates shares Edwards’ belief that mid-century modern is an on-trend look for 2015, but Yates elaborates saying casual is the big buzzword, “whether it is traditional, modern or rustic, the interpretation is rendered in a relaxed, easy to live with version” and “transitional styling will be a continued big focus.” Painted pieces (pastels, dusty vintage shades) are still popular as are “rustic finishes with weathered driftwood and barn board greys and browns. Lighter and mid-tone wood stains will grow in popularity including caramel and tawny colors on distressed pine and oak.” Yates says these are welcome changes from the merlot/espresso finishes of the last 10 years.

Standard’s furniture designers get their inspiration from “architectural elements, great antique pieces, furniture history books, artwork, and the shapes, colors and textures found in nature,” Yates said. “They watch for trends in the antique market, fashion and textile design, graphic arts, and even the automobile industry. They spot what is happening in home accents and accessories, lighting trends and the home construction industry. They are aware of how high-end interior and furniture designers are trending. In short, their eyes are always open for any type of visual inspiration that can be used creatively as elements in their furniture designs.”

Standard has also stepped up to the challenge of providing furniture solutions for tech-focused consumers. Night stands and end tables have built-in charging stations with USB ports and electrical plugs. “Technology and our dependence upon it has escalated rapidly in the last 10 years,” Yates said. “The addition of function features to furniture that make it easier to use our tech devices has added convenience that didn’t exist 10 years ago.”

Fashion and product function are important in the furniture business, but so is the business itself. One issue that keeps Ussery awake at night is the West Coast port dispute and the “rising freight costs on all types of transportation, (overseas and stateside). Plus, the increasing daily costs of corporations doing business in the U.S.”

Ussery says Standard strives to offer its retail partners “the best customer service in the industry and that doesn’t just mean superior care before and after the sale, it includes offering great product designs, carefully monitored quality controls and very sharp pricing. It also includes creative financing, cost saving shipping options, advertising support, and in-store training of their sales force by our sales representative team.”

To that end, for the last three years the company has focused on making more information available to its customers by way of more detailed product information, FAQs, assembly instructions and marketing materials like product romance copy and photography.

“For 2015, we will focus on updating our website and improving its access, making it easier to navigate,” Ussery said. “We do everything we can to help grow our retail partners’ businesses because they are our greatest assets, and when they succeed, we succeed.”

NAHFA DataLink: A Game-Changer for Retailers

By Robert Bell

NAHFA member Rick Howard knows all too well the love-hate relationship between the home furnishings retailer and his website. Howard loves the added sales and visibility that come with a store’s online presence. He hates the amount of  work that goes into populating the website given that each manufacturer offers its product data in a different format.

“It’s always been as hassle”, said Howard, owner of Sklar Furnishings in Boca Raton, Fla.,  “Everyone just thought all this time and effort was a necessary evil of doing business on the Internet.”

Not anymore.

The North American Home Furnishings Association has created an innovative service that promises to deliver standardized product data from manufacturers to home furnishings retailers who can then use the information on their websites, point-of-sale systems, e-catalogs, digital signage and more.

NAHFA DataLink will reduce the amount of time and labor retailers currently invest in building their web presence and product libraries, said Sharron Bradley, the association’s CEO.

“This is a game changer for home furnishings retailers,” said Bradley, of the program, which was introduced at the winter Las Vegas Market. “NAHFA DataLink is going to help level the playing field between brick-and-mortar retailers and e-commerce giants.”

Retailers have forever been frustrated trying to access manufacturers’ data—photos, pricing, measurements and styles—in a standardized format. Indeed, web-service providers often hire many workers whose full-time job is to download and format the different types of product data from manufacturers.

The labor is expensive, but much needed. Without that data, online shoppers can’t find what they are looking for locally, turn to e-commerce giants to do their research and shopping instead.

And make no mistake: Consumers are buying home furnishings online.’s highest-performing product category from Nov. 27 to Dec. 1—traditionally retailers’ biggest selling period of the year —was furniture sales. Yet even as online shopping grows, 90 percent of shoppers would rather buy from a brick-and-mortar store rather than online, according to Forbes.

With NAHFA DataLink, local retailers can make that happen by offering shoppers the same photos and information as Overstock, Amazon, One Kings Lane and other online giants. The difference, according to John Wells, president of Wells Home Furnishings, a two-store chain in West Virginia, is shoppers can drop by a local retailer’s store to look, feel and ultimately buy.

“I’m excited,” said Wells. “It’s becoming very clear to me and a lot of other retailers that to stay in business 10 years from now, we’ll need a store and web presence. NAHFA DataLink will help us build to that future.”

Wells uses a third party to populate his website, but he still doesn’t have the entire product data from his 100-plus vendors.

Bradley and other NAHFA officials are meeting with manufacturers. She said most are eager to participate, and that NAHFA’s hopes to have more than 300 manufacturers’ catalogs available to retailers by the High Point Market in April with more coming.

Pricing will be determined by the number of SKUs a retailer has. The service will be available to all retailers, but NAHFA members will receive a steep discount.

Howard said the program is needed among small and large retailers alike. “(NAHFA DataLink) isn’t about an end to a retailer’s brick and mortar. Nobody’s ready to give that up yet,” he said. “But technology is such that the business is changing for all retailers. Why not get ahead of the game now?”

Made in America: Is it worth it?

March 3, 2015 —

Seeing a Made in America label on the dining table you just bought may elicit warm fuzzy feelings for many of you, but does it mean that much to today’s consumer? Does it matter to your bottom line? Some in the industry say yes and yes.

Brian Garrison, owner of Garrison’s Home Furnishings in Medford, Ore., consciously shops for American-made product. In fact, nearly 85 percent of his inventory is domestic. When Garrison transitioned to mid- and high-end product a few years ago, his customers predominately wanted American-made, better built goods.

“All around our store you’ll see Made in America tags,” he said. “We occasionally run events and offer discounts only on the American made products. It’s absolutely a selling point for us. Our salespeople are more proud and excited to sell American made product and that enthusiasm often transfers to the customer.”

Tim Koerner owns Koerner Furniture in Coeur d’ Alene, Idaho, along with his brother Mark. While he doesn’t specifically shop for domestic product, he looks for the best value for his customers; sometimes that’s domestic and sometimes it’s imported. Koerner highlights domestic product by putting American flags throughout the showroom. One observation he’s gleaned from his customers? Men care more about where something is made and women tend to care more about the “best bang for the buck.”

He says country of origin isn’t always a selling point, nor is it necessarily an indicator of quality—price point is. It’s harder to find domestic product at lower price points, but Koerner’s discovered there are consumers who will pay for quality.

“The 55+ age group has money and they are willing to pay for nicer goods,” he said. “They don’t want to overpay, but if you can show them some of the reasons the goods are worth the money, the older generation will pay for it. One of the nice things about the American-made goods is that you can special order it. The customization side of American-made goods is where we have seen lots of success. I have always believed that American manufacturing would come back when the consumer was willing to pay for what they want. Importing special order is near impossible for me.”

Garrison thinks his customers do care where their product is sourced from, especially when it comes to better goods. “This is true up to a point though,” he added. “As much as a customer thinks they care, if the price is significantly more for an American-made product than an imported one (without a huge quality difference) most customers will still side with saving money. However if salespeople can sell the “story” of the product and/or the company making the product, that story will build value in the product, and people will spend more.”

Both retailers say they’ve seen an increase in demand for American product in recent years, though maybe not for reasons you’d think.

“When customers say they want American-made, they usually mean not made in China,” Garrison said. “Customers tend to be more accepting of imported product if it’s from anywhere but China. That being said, we are starting to see another shift towards American made.”

Koerner says he’s not sure if the increased demand is because of a push from consumers seeking the product or more retailers advertising the product—either way he’s seen a resurgence.

“I do believe in American-made goods, but not to the point I will put American on the floor just because it is American made,” Koerner said. “The American-made goods have to be worth the price.”
Jody Oettel, vice president of sales for Interiors in Lancaster, Pa., says her store supports buying locally to help the region’s economy and businesses, and she sees that in the same vein as consciously buying products made in America.

“There are customers who do ask about items that are are made in America and we are happy to show them many upholstery lines that are manufactured in the USA,” Oettel said. “Case goods are a bit more difficult, but there are choices available. We are proud to tell them the Stickley story about American-made wood pieces.”

Oettel says many consumers have no idea where furniture is made and are surprised to learn it’s imported. They’re even more surprised when they find out how that affects the product’s price. “They often want made in America, but with pricing that is not found on that type of product,” she said.

Lancaster is known for its Amish communities and Amish handmade furniture. “I believe our area is more aware of furniture made locally and in the USA by craftsmen because of that,” she said.
Furniture manufacturing moved off shore because it made more economic sense at one time. But as labor costs are rising around the world manufacturing in Asia isn’t automatically the most cost-effective option for U.S. furniture manufacturers. According to a manufacturing survey by The Boston Consulting Group, U.S. manufacturers (not just of furniture) are reconsidering domestic production because of labor costs, proximity to customers and product quality along with access to skilled labor, transportation costs, supply-chain lead time and ease of business. The study says furniture manufacturers could be overestimating their savings from off-shoring by up to 30 percent.
There are still some furniture manufacturers left who make their product domestically, but Koerner brings up some interesting points about made in America.

There are some manufacturers who make parts of their product in the U.S. or import components and manufacture them here. The federal regulation regarding Made-in-American labeling is administered by the Federal Trade Commission. It states that for a company to label its product “Made in America” the product must be “all or virtually all” made in the U.S., which includes the 50 states, the District of Columbia and the U.S. territories and possessions. “All or virtually all” means all significant parts and processing must be of U.S. origin. The product’s final assembly or processing must take place in the United States.

California’s requirements are more stringent. California prohibits the use of “Made in USA” labels or claims “when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.”

Some furniture manufacturers who label their product “Made in America” have gone so far as to make specifications such as “using domestic and globally sourced components” or listing the specific components that are made in the U.S.

“That’s why it is getting hard to be 100 percent made in the USA,” Koerner said. He points out that companies such as La-Z-Boy, for example, employ lots of people in the U.S. but they can’t (and don’t) claim to be made here. “On the case goods side, there is a lot of lumber imported from Canada, the environmentalists have made it to where we can’t cut our trees, we have to cut Canada’s trees,” Koerner said. “The world is truly turning into a world community. NAFTA is part of the success of made in America. I am trying not to import as much furniture, but I have no control over where manufactures source their materials. Part of me is not concerned with where the materials come from, as long as the USA continues to create new goods; there will be manufacturing of goods here in the USA, we just might be importing the raw materials.”

Koerner said about 20 percent of his product mix is made in the U.S.

One manufacturer that can make the unequivocal claim that their product is made in America is Gat Creek, based in Berkeley Springs, W.Va. Owner Gat Caperton says made in America has become its own category. Gat Creek products are 100 percent American made and it sources more than 95 percent of its raw materials from within a 350-mile radius of its factory.

Caperton began designing furniture in 1996 after buying a small manufacturing company that had built antique reproductions for more than 40 years. Gat Creek’s employees hand craft each piece of furniture from Appalachian cherry and each piece is signed by the person who builds it. Caperton said, “Made in America is a critical part of our story and marketing. It’s also a good selling point.”

He does see demand increasing, but only slightly, while the attitude toward the category has changed dramatically. “Five to 10 years ago, people looked at me with pity when I told them I manufactured domestically,” he said. “It looks cool today.”

Last year the company was recognized by the U.S. Department of Commerce for its export growth over the past year. The company exports to 28 countries.

Caperton sees many benefits to domestic production. “It allows me and our employees to live in the U.S.” he said. “Our folks really are a cornerstone to this community. Our workforce includes volunteer fire fighters, EMTs, and Sunday school teachers. We pay the taxes that fund local schools and our far-flung military. On the consumer side, all these things are nice and I like to call it sustainability. Buying U.S. sustains. It sustains our forests (more trees and tree mass in the Appalachian forests today than 30, 60 and 100 years ago), our environment (lower energy use = less carbon and other pollutants in our atmosphere), our communities and the American way of life.”
The downside is the “unfair” competition from Asia—government subsidized dumping of products into our markets.

For Caperton, the biggest reason Gat Creek is American made is the sense of responsibility he feels to the people who build the furniture, some of whom have been doing so for more than 40 years. “We have a great factory, truly world class in almost any measure, and talented people who care. I never wanted to become a marketing company like Thomasville and many of the other old-timers in the industry. I’ve always wanted to be a manufacturer.”

Randy Gleckman, national sales manager for Omnia Leather tells a similar story from the west coast. Chino, Calif.-based Omnia is a second-generation, family-owned business founded in 1989.
“Omnia has always been made in southern California,” he said. “Everything is designed and manufactured right here. There are a lot of companies that make leather in the U.S. and have a subdivision outside the U.S. for lower price points, but we don’t.”

Gleckman says many middle to better quality retailers do seek out American made product, when it’s not a price sensitive situation; and in fact when you say import “there’s a stigma of being inferior.”

Being domestically made is part of Omnia’s marketing story and it’s a selling point. Gleckman says though there are many advantages to being American made, one of the biggest is Omnia’s ability to offer the number of SKUs it does. “We sell a wide assortment of options, leathers, colors; we’re versatile,” he said. “When you go to imports it’s different. With us you can have it any way you want; with imports you can have it any way you want as long as that’s how it’s coming out of the container. We have a very loyal following that understands and appreciates what we do.”

Omnia also prides itself in its service and being able to react quickly, something the company couldn’t do if it was in the import business. “We’re more flexible,” Gleckman said. “We aren’t jamming retailers up with having to buy containers. We’re geared toward special orders. Whatever configuration, whatever color, we can do it.”

That flexibility does have a flip side though because it means having to carry more inventory so the customer doesn’t have to. Omnia manages to do this with about 200 employees and two buildings.
He agrees with Caperton and others that the appreciation for American-made product is growing.
“A lot of first-time buyers go for lower price point, the disposable furniture; but when they have to replace that they realize they should get something that lasts three times as long,” Gleckman said. “You get what you pay for. There is a pendulum swing coming back to U.S.-made products. People take pride in buying it now.”

What Would Disney Do?

March 3, 2015 —

When it comes to customer service, are you practicing on the sales floor what you preach in the employee lounge? Lee Cockerell, the former executive vice president of operations for the Walt Disney World® Resort, says the knee-jerk reply of many business leaders is “Absolutely!”

Yet Cockerell knows better.

“If you follow the leader around for a day in their office or furniture store you find that what they say and what they do are sometimes two very different things,” says Cockerell. “They might tell their employees that it is absolutely forbidden to send or receive texts while out on the sales floor. That’s a good policy to have because you want your staff’s attention focused on the customer. But I can’t tell you how many times those same leaders pull out their phones on the floor and start texting. Oh, sure, they’ll tell you it’s different for them because they’re big, important people, but what kind of message do you think they are sending their employees?”

Cockerell knows a few things about the messages we send—or don’t send—to customers, having spent the past 40-plus years working with Marriott hotels and, most recently, Disney’s resorts. More often than not, an employee learns customer service skills not from a book, but from their leader or supervisor who models how service should be carried out. Cockerell will share his insights on blending leadership and customer service at NAHFA’s Home Furnishings Networking Conference (HFNC) in Orlando on May 19.

Lee CockerellFormer Disney executive Lee Cockerell is one of many business and industry experts sharing their thoughts and talents at NAHFA’s Home Furnishings Networking Conference, May 17-19 at Walt Disney World’s Coronado Springs Resort in Florida.

Conference attendees will enjoy exclusive access to Disney Institute Main Stage sessions, behind-the-scenes tours and park tickets (for attendees staying at the Coronado.) For more information and registration visit or call 800-422-3778.

“Is the customer always right?” Cockerell asks. “Of course the answer is no. But does that customer have a credit card? The answer is yes, and if you want to keep that customer and their credit card coming back to your store you need to find alternatives to making them happy—even if it’s going to take the next three weeks.”

Cockerell says 70 to 75 percent of Disney’s customers are repeat customers. “That might be unthinkable right now in your furniture store, but it’s not impossible,” Cockerell says. Hiring the right employees is important, but so is having the right managers to lead them, he says.

“Think of you and the leaders in your business as parents,” says Cockerell. “Some parents want to be their children’s best friend, but it can’t always be that way. Your company’s leaders need to show the rest of your employees what’s right and wrong through their own actions.”

At the HFNC, Cockerell will spend an evening talking about what good customer service looks and feels like. He’ll also talk about the importance of training your employees how to achieve that level of service on a daily basis. “It’s not enough to hire nice people anymore,” he says. “Nice people who aren’t trained are a disaster waiting to happen because niceness only goes so far.”

Good customer service is as much an investment as lighting, technology and advertising. And like those elements of your business, Cockerell says you need to educate up front. “You can’t perform your customer-service training on your customers,” says Cockerell. “Would you want a surgeon training for a procedure on you?”

The Selling Equation

January 5, 2015 —

Generally speaking there are three types of home goods retail selling environments:

A) The “Live on the Traffic” Operation
B) The “Room Design” Operation
C) The “Hybrid” Operation

The “Live on the Traffic” operations typically are highly promotional and focused on closing the deal when the customer comes in the door the first time. Salespeople perform little prospecting on their own. They tend to sell from stock types of operators and offer various financing programs.

The “Room Design” operations are much less promotional. They build a following through spending a greater amount of time with each client. They don’t need the traffic counts that promotional retailers need because they generally produce a larger ticket size per customer. They tend to be special order, room planning and customer in-home focused operators.

The “Hybrid” operation, as the name implies, is a mix of these two. They have a blend of promotions to drive traffic and also offer some special order, but usually are limited on the actual in-home design services.

I have seen great successes, dismal failures and everything in between in all of these environments. So there is no right or wrong type of operation. The main thing is that you know who you are and how to improve. That’s what the sales equation will help you do. It sets the stage for improvement in your top line revenue in any selling environment. Here’s the equation:

Sales = Customer Opportunities (Traffic) x Close Rate x Average Sale

Whether you are a “Live on the Traffic” or a “Room Design” type of operation, determining the elements that make up your sales equation are a critical and a necessary part of improving it. If a promotional type operation has interactions with 2,000 customers in one month and closed 35 percent at $1,000 each on average that equals monthly sales volume of $700,000. At the other end of the spectrum, a home design operation might get the same sale results with a different mix. If they have 700 customer interactions with a 25 percent close rate and a $4,000 average ticket, they would also produce $700,000 in monthly sales volume.

The Value of Improving the Elements

I will use the first example to illustrate the impact of what a 10 percent increase in each of the elements in the equation would have on overall sales. So, customer interactions become 2,200, close rate becomes 38.5%, and average sale becomes $1,100. The result is sales of $931,700. That is a 33% increase in sales based on just a 10 percent increase in the elements.

The reason I am showing you this is to encourage you to take the first step, which is to become familiar with your sales equation. You should know these performance indicators for any given date range and definitely track it on a weekly, monthly, quarterly and annual basis for all stores, salespeople and categories.

To get the data, you will either need a software system or go through the tabulation manually in Excel. As long as your information is accurate, the resulting information will help you set a strategy to improve your top line.

Customer Opportunities (Traffic)

This can be the most challenging part. If you just ask your salespeople to report their selling opportunities to you, you will likely get mixed results. The best way that I have seen businesses get accurate traffic counts is through using a Customer Relationship Management (CRM) software system where salespeople record their customer counts. This data is compared to a visual proof traffic counting system. These two systems ensure a level of accuracy. In fact, several stores I have worked with are reporting 95 percent CRM opportunities recorded vs. traffic counts.

Traffic is one of the most important Key Performance Indicators (KPIs) in retail. I often say, “Knowing Traffic is Retail 101.” Along with being a vital part of the sales equation, it helps you judge the effectiveness of your advertising. If you executed a certain promotion, a measure of its results in bringing people to your store is seen in your selling opportunities during the promo period. Or, if you are an operation that is less promotional, the number of selling opportunities is an equally important indicator of how well the salespeople are doing in engaging their customer base.

Traffic is also an important factor in determining correct staffing levels. One of the top reasons a sales floor underperforms is not having the appropriate number of properly trained sales associates. Without traffic numbers, you may be guessing at your correct staffing level. With this, a store that lives on the traffic will need a much higher number of sales people per customer ratio than a highly design-oriented store. For example, I have seen high-traffic stores operate with 180 to 200 customers per salesperson per month and design operations operate successfully with 80 to 100. You’ll have to find the right ratio for your store.

Close Rate

Once you know your traffic, this part is fairly easy. Just take your number of sales and divide that by your selling opportunities. This will vary by the type of operation and category of merchandise, too. Categories such as mattresses or appliances, for example, should get a high close rate. Often, these are necessity purchases so closing on the first visit is important to success. I have seen verified annual close rates over 60 percent and as high as 80 percent in these categories.

Also, for operations that do not follow up with customers who are “just looking,” it is very important to focus on tracking and improving close rates as they are relying on making the sale on the first visit. Because once they’re gone, you won’t have any way to contact them.

Other operations that do more follow-up, design work and in-home visits, may have several face-to-face meetings with a customer until a sale is finally made. They may have a lower close rate overall because they are good with follow-up and actually engage their customers more often. Close rates in full-line furniture tend to be between 15 and 30 percent.

Average Sale

Finally, average sale is the total of all tickets per customer per day divided by the total volume. Whatever type of operation you run, high-end, low-end, special-order or stocking focus, average sale is a critical performance measure.

Know where you are overall in your business on a monthly and quarterly basis.

Set minimum performance standards for your sales teams to achieve overall and individually.

Constantly Implement Strategies to Improve

Whether you are a high-turn operation with an average sale of $1,000 or a room-planning operation with an average sale of $2,500, a $100 dollar improvement means exactly the same thing for each sale completed. When a business is above its break-even sales level, that extra $100 equates to typically 30 to 40 percent in extra profit. So it really matters and adds up. In the home furnishings industry, I have seen average sales range from as low as $500 to as high as $5,000.

Whatever type of operation you run, start by implementing processes to collect data so you know why your sales volume is what it is. From there you can set clear expectations for each metric to achieve your desired volume. Then you can develop a strategy for improvement. Continually tracking the sales equation will act as your report card. Keep improving your selling, marketing and customer follow-up processes. You will likely see improvements in traffic, close rate, average sale size and, of course, your overall volume of business.

David McMahonDavid McMahon is a management consultant and certified management accountant. He is director of consulting and performance groups for PROFITsystems, a HighJump product. You can reach him to discuss improving your situation at

Answering the Call

January 5, 2015 —

Reach out and touch someone? This 1980s advertising slogan by AT&T focused on the power of phone calls and their impact on relationships. Is the telephone in your store being used in the same way—as a powerful business tool? Is your staff effectively handling incoming calls and maximizing outgoing calls?
Furniture stores spend time, energy and money developing a marketing message designed to create a relationship or image with the consumer long before entering the store. A poorly handled phone call may dilute, muddle or even destroy that message.

For years I have been calling furniture stores. Sometimes these were stores under my supervision and others were competitors. I still call furniture stores today. Three recent phone conversations illustrate the potential to ruin a carefully crafted marketing message.

A major national furniture retailer was advertising via email a “First Time Ever Finance Offer.” Having a background in consumer financing, I was curious and picked up the phone to call the local branch. The person answering the phone identified himself as a salesperson and asked how he might be of assistance. After explaining I wanted information on this first-time offer, he informed me he had been off for a few days and not aware of the promotion. Apologizing, he asked me to hold while he gathered the information. He quickly returned saying he was sure there was a memo on the promotion, but he could not find it. He could check with his manager but the manager was busy helping another customer. Perhaps I could call back later? I never called.

I called another store about an advertised mattress. The salesman was polite and knowledgeable. He encouraged me to come in and check the mattress out. Be sure to ask for me were his parting words although we never knew each other’s name. He never introduced himself and never asked for my name. I never went to the store.

Finally there is the retailer who must feel he has addressed any possible phone issues in ways that would surely please his customers. Yes, the automated answering machine informs you that everyone is taking care of other guests and then the endless loop of options begins. Press 1 for this, 2 for that and so on up to 6 options. Of course your message is very important, the recorded voice assures you, please leave your message after the beep. I never left a message.

Often stores go to great lengths to train their staff on the features and benefits of the merchandise. They take pride in their staff’s ability to present all of the positive aspects of the furniture. They practice and train them on the selling process, from greeting to closing the sale often placing emphasis on the importance of building a relationship with the customer when they enter the store. Shouldn’t you place the same level of emphasis on training to take or make phone calls?

The telephone is a powerful extension of advertising and marketing when used correctly. Improper or untrained telephone usage may be threatening your business one call and one customer at a time. Surely there are many calls that go smoothly but what is acceptable? Are seven out of 10 well-handled phone calls an acceptable rate? Isn’t every phone call important?

Countless courses and training tools are available for the proper use of the telephone. One that I reviewed covered more than 50 unique phone scenarios and how to handle them, but I’m not sure the person who developed this particular training ever managed or worked in a busy furniture store.

Instead, here are practical solutions for training and using the phone in your store.

Answer phone calls promptly and preferably by a human not a recorded message. An unanswered phone sends the message to the caller that you may be short staffed or not interested in new business. Customers in the store hearing the incessant ringing phone must be thinking, why don’t they answer the phone? Establish a maximum number of allowable rings by which a call is to be answered. I suggest no more than four rings.

If you must use an automated system keep it short, simple and promptly return calls to any messages.
Standardize the greeting used to answer the phone but steer away from long mandatory scripts. In today’s technology-driven world, customer patience levels are shortening. Have you ever experienced the drone of a long-winded and uninspired script that employees have been asked to use?

Before beginning a shift, bring employees up to speed on the store promotion, terms, event or products being advertised. Cheat sheets with event details close to the phone are great reference tools and reminders for your staff.

Use thank you early and often. Thanking a customer for calling, thanking them for their business or thanking them for the opportunity to solve a problem goes a long way in a customer’s experience.
Don’t makes excuses to customers why someone is not available. A simple “He’s not available right now” is more professional than “He had to run home to let his dog out”.

Be sure to say you are sorry if the customer is having a problem, apologize and commit to finding a solution to the problem.

Create processes for getting messages to their intended recipients on a timely basis. A broken promise to receive a call back offsets any goodwill or positive marketing efforts. A multi-part phone log allowing notes to be handed out while maintaining a permanent record is one option.

Be mindful of keeping or forgetting calls on hold. Need I say more?

Teach your staff to introduce themselves, get the caller’s name and use it appropriately. Take a call back number just in case you are disconnected.

Of course the phone works both ways. Outgoing calls are powerful tools to help you maintain your customer base, grow your business and cement the customer’s relationship with your store. Consider the following for making outbound calls.

A personal call to thank customers for purchasing or simply visiting the store is powerful. Many stores focus on the power of thank-you cards, but a thank-you call is just as powerful. Remember to use and share names in the conversation.

A call to make sure everything went smoothly with the purchasing process may be viewed by some employees as opening a can of worms for problems. Seriously, don’t you want to know if there are problems that need to be addressed? Whether the process went smoothly or there is an issue, your customers will appreciate the effort.

Train your staff to pave the way with customers for future calls by asking permission to reach out in the future with special offers or events. Salespeople rarely enjoy cold calling and many customers do not appreciate being cold called. Think of this as permission-based marketing similar to having someone opt in to an email process.

Call customers with information before they call you. If their merchandise has arrived early or arriving later than expected, a phone call will be appreciated by your customers.

As a store owner or manager, open your ears to listen and really hear what is going on with phone calls. Coaching or praising an employee immediately after a phone call is powerful and lets them know you are listening. You may even consider a secret phone shopping service to measure how the store is doing with telephone calls. Call your store from time to time; you may be surprised by what you hear.

Marty founder Marty Grosse has 35 years of experience including senior positions across six top-tier retailers. Furniche provides visitors real, relevant and timely shopping advice with access to research, local furniture stores and manufacturer information. Contact him at

Uncovering Opportunity

November 25, 2014 —

Whether you call it a sofa, couch, divan, davenport or settee, few can refute the satisfaction it brings to plop down and relax on a comfy surface at the end of a long day. RetailerNOW spoke with four upholstery manufacturers for this snapshot of the market—Reyna Moore, vice president of marketing and merchandising for Norwalk Furniture, Len Burke, vice president of marketing at Klaussner Furniture, Mark Gilmore, vice president of sales at CR Laine and La-Z-Boy’s Paula Hoyas, vice president of merchandising, Chuck Seilnacht, director of retail excellence and Mark Wagner, vice president of brand and retail marketing.

RetailerNOW: What’s been the biggest innovation in upholstery in the last five years?

Moore: Function and technology. Consumers want to maximize the use of their furniture. We’re not just talking about ottomans with built in storage but also about pieces traditionally reserved for use in one room showing up elsewhere. People are building master suites with sitting rooms furnished with elegant chairs and smaller sofas. Technology has been the biggest change in the industry. We need to embrace how we use technology to reach consumers. Norwalk has launched an app for our Kent group—retailers download the app in-store and consumers can “play” with the furniture, changing arms, seats, fabric. It’s a nice tool to discover the collection and it diffuses the nervousness people may have about buying furniture; it’s a great icebreaker.

Norwalk TribecaNorwalk makes furniture shopping fun and interactive with its mobile app developed exclusively for its Kent collection.

Burke: It’s important to keep up with technology so you can anticipate how that will translate to consumers’ furniture needs. For example, we used to have to keep in mind that users would need to sit right in front of the TV for maximum viewing pleasure—that’s not true today. To keep up with new technology, Klaussner sends staff to the Consumer Electronics Show. We need to know what’s happening in technology. We’re fighting for disposable income and competing with electronics, travel, auto, not just furniture. CES is a very exciting show and we try to bring that back to our showroom. We show 12-15 big screens (55”— 90” TVs) and the new 4K; we do it to show dealers what they’re competing with. We partner with one of the largest electronic distributors in the U.S. to make these TVs available. Dealers need to embrace technology—not run from it. We also have to keep up with components that are compatible with Apple products. Everyone is sitting there with iPads/iPhones; everyone is connected and everyone is looking to integrate those components into the furniture. Tech dictates the consumers’ lives.

Klaussner StudioKlaussner’s Studio theater seating (below) is the perfect mix of comfort and technology with its power recliners and lighted cup holders.

Hoyas: In motion the innovation is all about power, power, and more power. It’s finally here—I’ve been in the industry for many years and always felt it was coming. Powered motion offers comfort and adjustability literally at the touch of the button. The technology and design offer more angle options and the ability to independently recline the back or the foot rest. And the wallaways are perfect for smaller spaces.

Gilmore: Absolutely the changes in technology, from the way we communicate via social media to our dealer’s ability to access information through our web portal. We’re using iPads and at some point catalogs won’t be used as much (though not right now). Five years ago the social media platforms didn’t exist like they do today. Facebook has slowed and Instagram is huge. Houzz, Twitter, Pinterest—they allow us to reach out to consumers and inspire designers. They’re looking for ideas and using these tools. Our dealer portal on the website is filled with information and available 24/7 so they can look up orders, fabrics, access the digital library—our customers don’t have to wait to get their questions answered. Then there’s the technology in manufacturing itself—we’ve made several capital expenditures in our cutting equipment and manufacturing that’s helped us with capacity in that last few years.

RetailerNOW: There are so many colors and patterns in upholstery at market, but on the retail floor there are a lot of blues/browns and neutrals. What is the consumer really after and are we giving them what they want?

Moore: Consumers want their furniture to have longevity; they add more color with accent chairs and pillows not necessarily the big pieces. When we look at our patterns we don’t judge the performance of a fabric by the yard, but where it’s placed. Consumers are trying to be more on trend and with us having more custom options they’re able to do that.

Burke: As domestic business comes back to the U.S. you’ll see more retailers using color. Before, if you ordered a container of red sofas for example, and it didn’t sell you were stuck with lots of red sofas. We offer 600 fabrics but 40 percent of our business is special order. We give retailers choices; our business has come back and retailers are looking for a domestic supplier. This is a fashion industry and everything derives from apparel and paint; we’re seeing retailers taking a bit more risks now.

Hoyas: We’ve been enamored with color; consumers love it and tell us that and then when they have all of the options in front of them they pay homage to the neutrals. But the colors can come in accessories and accent pieces so their investment is safe for a number of years with the base colors. Retailers are pulling in more color on their sales floor. With patterns we see a lot of the smaller scale patterns, geometrics, abstracts, floral abstracts. We’re also seeing more traditional transitional looks—consumers want a traditional foundation but not grandma’s traditional. Think textural menswear looks, leather, tweed and natural fibers—the foundation is tradition, but updated it’s actually what you’re seeing in fashion with boyfriend cuts and oversized menswear cuts in women’s wear. Furniture always follows fashion, but with everything out there on TV and the Internet, we’re closing the gap and people don’t have to go off to study these designs or styles—everything is instantaneously available.

CR Laine JEREMY SOFACR Laine provides dealers with tools and resources to help them recreate the vignettes that draw consumers attention.

Gilmore: Market is the fashion runway; everything we do will get somewhat boiled down to the end consumer and the end consumer plays it far safer. Consumers want design help; they say ‘I’ll know it when I see it.’ We try to help dealers see the possibilities or ideas and then replicate them in their showrooms. We give them paint colors, and design ideas and information on the vendors we use for our lighting, rugs, accessories, etc. We’re trying to inspire the dealer to do this so the customer will just walk in and love it—and buy it. The reality is it doesn’t always happen that way. The way we merchandise our showroom takes a significant financial commitment; but retailers can take pieces of it and make it their own. We put quite a bit of time and effort twice a year into designing and merchandising our showrooms, but retailers are doing it every day and that’s hard work. Their sales floors are always changing. When dealers sell stuff it’s great, but it adds to your work. It takes a significant amount of effort to be done right.

RetailerNOW: How do the ever-changing regulations (such as in flame retardants) impact your business? Do your retail partners seem concerned about this issue?

Moore: In areas of the country where people are a little more exposed to the information, we get more questions. Moms are concerned about safety in the home—those customers are asking for it. Norwalk is more of any early adopter of these types of things; we want to take a position of leadership.

Burke: The retailers are asking questions. There’s been a lot of press about it; is it harmful? Is it not harmful? For us it hasn’t been an issue because we pour our own foam, we aren’t dependent on a third-party supplier and we can react quickly to whatever needs to be done. We’ve been able to adjust to that.

Gilmore: The issue is the regulations are an ever-moving target for manufacturers and what [legislators] don’t realize is the number of steps in the manufacturing process. It’s not as simple as slapping a label on something. The reality of the flame retardant issue is very few dealers ask the questions. Quite some time ago we took the (flame retardants) out. There are a few who are socially minded who are asking.

RetailerNOW: What type of product information or training do you offer your retail partners?

Moore: We have a corporate trainer and we have training here at the factory. We just hosted a two-day training class and we had everyone from a new designer to someone who’s been selling for 15 years. After market we bring product back to the factory and merchandise our showroom here because we use it as a training ground. We do product training and sales techniques. Right now we have monthly classes, 35 people per class, and retailers are asking for regional training. Coming here is a huge success because they can see the factory and see how product is made. We follow their sales afterwards and we see huge spikes.

Burke: We launched Klaussner University in April, an online training course for sales associations. There are modules on Klaussner product knowledge, upholstery, casegoods, motion, sleepers, and leather. It’s interactive and allows them to work at their own pace. There’s backend reporting for managers, printable worksheets and testing and certification. Training is important and our reps do a good job but this new program provides instant training.

Seilnacht: La-Z-Boy offers all of our retailers a comprehensive online training curriculum. Our product knowledge courses cover upholstered products, new introductions, and mattresses. Our selling techniques courses include a seven-module series and other selling skills courses are focused on presenting finance options, selling casegoods, and more. We also have a suite of more than 20 management training courses that has both basic management skills training and courses specific to retail management.

Gilmore: The web portal is helpful, but our reps are consistently out in front of the dealers—training is important. Retail stores have turnover so you are constantly training; we have product-knowledge meetings multiple times a year. For the last three years we’ve offered intensive two-day training sessions here at CR Laine. The training is on things they should know about selling leather furniture or patterns on curved backed chairs, not specific to our product—we keep the numbers low—small groups (20 people). When they walk out of here they feel confident. More knowledge brings confidence, confidence brings trust and trust brings sales. If you can achieve those things…if you show that confidence to the consumer they will believe you and they will buy, it’s not complicated.

RetailerNOW: How are you effectively marketing to Millennials and/or how are you helping your retail partners do the same?

Moore: We’re marketing to them through social media and we’re reaching out to younger retailers to see how to go after that group. Our Urban Studio collection was designed for the younger customers as well as small space living (baby boomers downsizing). It’s for the young executive who invests in quality product and they tend to be more contemporary; they’re also more comfortable with colors and the color palette in that collection is strong. This members of this demographic group are curators of their own home and we recognize that.

Burke: We’re obviously designing product for them. We’re trying to stay informed on social media and we’re keeping our retailers tuned in. Photography changes every day, videos are important and we supply the marketing assets and ideas to the retailers; our brand is the dealer’s brand; we have to help them come up with ideas.

Wagner: Our products are designed to appeal to consumers who are interested in creating a comfortable and inviting home, and are seeking high-quality furniture at a great value.

We market to more of a mindset, rather than a specific age demographic. We offer consumers a full line of products in a wide range of customized styles for the living room and family room. We support retail partners with comprehensive marketing programs, including national media campaigns, in-store promotions, public relations and social media efforts.

Gilmore: Our focus is how to meet consumer needs not just one demographic. We build a product with the consumer in mind—does it have the right sit, pitch, comfort, styling, color. There are people in their 20-50s driving Mercedes; Mercedes doesn’t go after a certain demographic.

Uncovering Opportunity

Here’s something that might come as a surprise to you: The majority of upholstery sold in the United States is made in the United States.

“These are not jobs that have returned home, these are jobs that never left,” said Pat Bowling, vice president of communications for the American Home Furnishings Alliance (AHFA).

Interestingly enough, these upholstery factories are having a hard time finding workers. AHFA’s Solutions Partners division is trying to help uncover the reasons why these jobs have been difficult to fill and possibly develop a campaign to help recruit new workers.

Part of the problem may be training. Lower end upholstery factories used to be a training ground for factories that specialize in higher end, more custom products. But as production of lower priced products moved overseas, U.S. factories lost their pipeline of trained workers.

Another problem might be the misconception that all the furniture jobs are going overseas. “If you think about it, all the media attention focused on plant closings over the last decade has most people thinking ‘no one makes furniture in the U.S. anymore’,” Bowling said.

Mark Gilmore, vice president of sales, CR Laine said “It takes a trained person to do eight-way hand tied and it’s not as simple to get those people. There aren’t as many people out there doing that.”

Gilmore and others in the upholstery industry are encouraged however. Catawba Valley Community College, Hickory, N.C. now offers a two-year course in upholstery manufacturing and it’s first class (soon to be graduates) was full.

The Roller Coaster of Sales

November 25, 2014 —

Of all the important things you do in a furniture store, planning and holding effective sales meetings may be the most important. Anyone who has ever managed a store knows the work never ends. There’s merchandising, operations and marketing that need to be taken care of, but let’s face it: nothing else ever happens (or matters) until a sale is made. It is easy to overlook the importance of a good sales meeting and the impact it can have on your selling success.

When salespeople are selling and everyone is buying, there’s no feeling like it. And when salespeople are selling and nobody’s buying, well, there’s no feeling quite like that either. Selling is an emotional roller coaster. That’s why your sales crew needs meetings that help them grow, improve and stay focused.

Think about how you plan sales meetings. What does a good one look like? What do you include in your meetings? Where do you divine your creative inspiration? How do you deal with all the different sales people and their personalities? And if selling is a roller coaster, where is your seat?

Here are a few tips for improving the impact and effectiveness of your weekly sales meetings.

Create a sales meeting calendar

This should be done after establishing your advertising and marketing calendar for the month or quarter. Good sales meetings will maximize advertising expenditures. Advertising plans also provide a framework for sales meetings. When does the promotion run? What is the featured merchandise? Is there a finance offer or other specials with the promotion? All of this is important to review with your staff. Have you ever had a salesperson ask “Are we running any merchandise or other specials right now?” Not exactly reassuring, and a bit cringeworthy.

Create a meeting template

Think of your meetings as a hamburger. The top bun is the basic information of the promotion including time frame, types of advertising, merchandise specials, financing or any information that the sales team should know. The meat of the meeting should be something that enhances or reinforces one of the tenets of selling such as the greeting, probing/qualifying, presentation, overcoming objections, closing or following up after the sale. The meat you choose may be guided by one of the key elements of your event. Maybe it is spending time in the bedding department working on “qualifying” the mattress customer during your gigantic “Pedic” event. The bottom bun of the burger is preparing the team mentally for the game of selling. We all have outside distractions in our lives (relationships, pets, mortgages, children, vacations, etc.) it’s important to help salespeople focus on the day at hand and the customers. Use the bottom bun, or end of your meeting, to reinforce any sales contests and goals.

Stay focused

Do not use sales meetings as a venue to review operational or team dynamics issues. These items need to be addressed but not here. I once attended a sales meeting where the manager reviewed a litany of problems and finished the meeting with an enthusiastic “Now let’s go out and have a big day!” Really?

Spice it up

Remember, selling is fun! Find creative ways to spice up your sales meetings and fight the “same old same old” syndrome. Think about occasionally changing the meeting location. I once held a sales meeting outside in front of the store. You can hold one in the back of a delivery truck complete with chairs and a movie screen. Engage your staff by involving them in the meeting in some way. Think about a skit, a scavenger hunt, game or simply researching a new product on the floor to share the features/benefits with the other sales people. There is always the old standby of having a factory rep come in and do part of the meeting. Make sure you trust the rep to keep it positive and upbeat.

Find a story

Everyone has a story. Find selling stories in everyday life that parallel the selling process on your floor. I once held a sales meeting named “The Selling Secrets Only Your Hairdresser Knows.” The meeting was held with the sales team behind me looking into the mirror complete with a customer in the chair in front. Think about it: Hairdressers have to ask careful questions of their clients to determine their needs. Hairdressers are always looking in the mirror at themselves knowing that the customer is evaluating their looks and evaluating their professionalism. Hairdressers must have all their tools within reach to do their job and, of course, they rely upon repeat business and word of mouth from happy customers. Sounds like selling furniture doesn’t it? Train yourself to look for selling situations everywhere you go. There is nothing like a story (good or bad) to reinforce selling skills. Another benefit of this could be you end up recruiting that employee at the dry cleaners to be part of your sales force.

Be open to critique

At the start of the next sales meeting ask for a rating of 1 – 10 on the previous meeting. By conveying a servant mentality to your team in helping them improve and perform at higher levels, you may be surprised at the feedback you receive. Let them know you want to improve to help them get better, make more sales and ultimately make more money.

Use technology

Videos and movie clips can help make your point. Blogs devoted to selling can also help. There is even a Pinterest board out there for sales motivation ideas.

Get everyone involved

Invite your non-selling staff to the meetings from time to time. It never hurts for them to gain a better understanding of the selling process. They may ask some enlightening questions that benefit everyone.

Have fun

Take your work seriously but do not take yourself too seriously. Sure you’re the boss and, yes, you are important and of course everyone should cling to all those nuggets of wisdom you utter and … Come on this is the furniture business! Have some fun. Be sure to celebrate individual and group successes in your meeting. Most importantly keep every sales meeting positive!

Effective salespeople and teams require positive, upbeat and regular sales meetings if you want them to get back on that roller coaster and ride it over and over again. Now get in the front car, buckle up, throw your arms over your head and scream with delight when your crew achieves sales goals. There is nothing like a roller coaster to get your blood pumping. And don’t worry, your sales people will be right behind you. founder Marty Grosse has 35 years of experience including senior positions across six top-tier retailers. Furniche provides visitors real, relevant and timely shopping advice with access to research, local furniture stores and manufacturer information. Contact him at

Calling it Quits

November 25, 2014 —

The subtitle of a Van Morrison album is, ‘No Plan B’. The album comes to mind as I wander the aisles of a retail show and see so many vendors offering their services to help you close your business. Just before writing this column, I received an email from a couple who had been in business for 35 years and were looking at closing their doors.

Their business had been on the market for three years without producing a sale. They were asking if it was time to consider Plan B—closing the store. This is not the first time this scenario had been discussed, but to this writer, Plan B is not a good alternative.

While they mentioned visiting with their attorney and accountant, it appears the conversation is a few years too late. When you want to sell a business, these discussions need to be held about five years before you want out.

There is a different strategy to operating a business through the last few years and the preceding years of the retail life cycle. When you are operating your business, as the owner you have an advantage that most people do not get.

Most people get a W-2 at the end of the year and there are a minimum number of tax and medical deductions they can take. The owner of a business can do a lot more. From having the business provide you with a car to giving your children a salary instead of an allowance, there are many opportunities for the small business owner to place a lot of expenses within the operation of the store.

Of course, this makes the store earn less, but there’s something neat about paying your children to take out the trash at the store and being able to pay them money as a legitimate business expense instead of giving an allowance which is not tax deductible. You are not as concerned with the bottom line of the business when you are getting these perks.

However, when someone wants to buy your store, in addition to looking at the store they will want to look at as many as five years of financials. This is the same five-year time frame we were just mentioning.

When the buyer is going to offer a contract, they are going to pay for the inventory at landed cost, a fair valuation of the fixtures, equipment and the build out of the store, and the best part—‘good will’ or ‘blue sky’ money which is calculated as a multiplier of the average of your net profit for the last three to five years.

Stop and do the math for your store right now. Look at the net profit for the past five years and add those numbers together. Divide by five to get the average, and then we will assume your buyer is going to offer you 2.4 times that average amount. Nice pile of money?

That explains why for the last five years you own the store, you want to get all of these ‘marginal expenses’ out of the business. Look at all of that other money we talked about in inventory, fixtures and other items. If you choose Plan B and close the store, you are getting none of the blue sky or good will, pennies on the dollar for the fixtures, equipment, and build-out. Also, your now-empty building is not only worth less, but your insurance is going to be more expensive for an empty building.

I bet the couple who contacted me would think differently about closing their store if they knew how much money they could get by selling.

I have many questions for my prospective selling couple.

How many different brokers have you utilized in these past three years? Were those brokers specialists in small business? Where have they been advertising the business? Have you had someone give you a qualified business evaluation so that you know you are asking the right price? Have you considered keeping the building, but selling the business?

There are a lot of questions to be asked when you are thinking about selling the business. Those questions need to be asked—and answered—well before the day you want out. And knowing now what you can get from selling a profitable business, there should be no Plan B.

Subscribe to Tom Shay’s e-ret@iler, a free monthly newsletter packed with tips for improving the profitability of your store, at

Sales to Plan. Do You Have One?

November 25, 2014 —

A few years ago, I attended a sales leadership conference of a multi-billion dollar corporation in Hawaii. I sat with the top 20 percent of a sales force that numbered in the thousands. It was like a rock-n-roll show with two massive screens on either side of the stage in the auditorium.

The vice president came on the stage. Before speaking, he presented two slides: The first slide was plain and simple: “Sales to Plan.” The second slide was even simpler: “104%.” Music erupted and a standing ovation ensued.

There are many Key Performance Indicators to measure a company’s success. Sales to Plan was the most important performance indicator that this company’s team was concerned with. Most other numbers in the company relied on the sales team achieving this metric. Profitability, operating spend, inventory, number of employees and liquidity levels—all required sales to achieve their plan. Your home furnishings store is no different. It is interesting, though, that many other smaller businesses don’t always share the same focus on setting and achieving an actionable plan as this top corporation.

Achieving your desired sales volume is critical to growing your profits and cash flow. If you fall short of your sales target, your fixed expenses will eat into your profits and make payables difficult. This is fairly obvious, but the truth is that many small home furnishings stores don’t have a good handle on what their targets should be and how to achieve them. Some retailers even ignore company-wide sales goals altogether choosing instead to focus only on the goals of individuals. Best-practice businesses, on the other hand, set achievable sales volume targets. They ensure they have sales and marketing teams in place that can match or exceed their targets.

Actual sales are easy enough to determine. The tricky part is setting the target. Should you just pick a number, say 10 percent, and add it to the previous year? Should you keep the number flat? Should you ask your salespeople what they think they can achieve? Or, should you figure out what sales you need to produce a certain profit?

Whatever you decide it is a prediction. Your sales target will rarely be perfect. No one can see the future and everything that will occur in a market while factoring regional and national economies. However, setting this target is the best way to send a message to your team of the direction of your business. Without this goal, your chances of getting there and surpassing it become much less likely.

There are six steps to setting sales to plan:

  1. Determine your annual sales plan on written business. You can use a percentage-increase-over-last-year method or a profit-up method. With a profit-up method, you start with your bottom-line net income and factor all fixed and variable expenses to determine a required sales volume. A third way is to use this formula: Planned Sales = Planned Number of Customer Visits x Planned Average Sale x Planned Close Rate. Just make it realistic.
  2. Break down your sales target into four quarters and 12 months. Review your three prior years to determine if there is any significant seasonality. You cannot just take annual goals and divide by 12 as different months have a different number of weekend days.
  3. Break down your sales target into 52 weeks, seven-day weeks. (Monday-Sunday). This accounts for full weekends and allows you to set an average weekly volume target.
  4. Review the company goals with your sales team.
  5. Help your salespeople set achievable targets. Individuals are just that—individuals. Some are proven top writers, some are average. Do not set everyone with the same sales goal. This is less motivating to the top people and unrealistic to others.
  6. Define your strategy. What do you need to do to make your numbers? This will involve defining specific operational tactics. For example, if you determine that planned customer visits and close rates are going to remain constant, average sale size must increase to produce a higher volume. This may be done through focusing on add-ons, group pricing and merchandising tactics.

So how do you use Sales to Plan as a Key Performance Indicator to grow your business?

It’s easy, really. At the end of each week, report the results for each salesperson and for the entire operation. Weekly Actual Sales/Weekly Planned Sales. This is your weekly report card. On a weekly basis, report the month-to-date numbers with respect to the target. If you are above 100 percent, you are on target. Once the month is over, nothing can be done. The purpose of weekly tracking is to check your progress while you can still do something about it.

Remember to spend some time after the month has concluded to analyze why you exceeded your planned volume or why you missed. Make tactical adjustments to correct when necessary. Here are some areas to dig into when determining how you ended up where you are:

  • Break down sales into its parts: Total number of customer visits, average sale, and close rate.
  • Look at sales produced by each one of your sales reps.
  • Review sales by inventory, vendor and category.
  • Review return on promotional activities.

Your sales plan needs to be assessed every quarter—not just for the prior three months, but also year-to-date. You want to be over 100 percent here. If you’re off target by more than 5 percent, you should re-examine your strategy. Are your goals unrealistic or too low? If you find that hitting your numbers is not possible, you may need to reduce other expenses to maintain proper profit levels. If you find that you are well ahead of your target level, it may be time to up the bar. That’s a good thing!

Your annual review is a time to reflect on the past. Use what you learn from that review to set a new strategy for the following year. Build on your successes and, just as important, learn from your failures. Go through the entire process of setting a new planned level of sales.

The first step to improving something is to track it. The absence of a plan is either a plan to fail or a just dream. The KPI Sales to Plan allows your organization to be forward looking and gives you a performance report on arguably the most important number in your business: Your Sales Revenue.

David McMahon is an industry business consultant and certified management accountant. He is director of consulting and performance groups for PROFITsystems, a HighJump Product. He can be reached for questions or comments at