How Do You Compare?
by Phil Latz
Don’t worry, I’m not talking about body image here! The world is already too full of unhappy people trying to match impossible comparisons to photoshopped images of movie stars and other ‘celebrities’…
In personal and social settings, comparison may be harmful. But in business, it’s a useful tool that research companies have built a whole industry upon. They’ve even given it a more business sounding label: benchmarking.
For many industries in Australia, from hotels to hair dressers you can find in-depth benchmarking data to see if your business is above or below average regarding a whole range of KPI’s (key performance indicators). These can include everything from gross and net profit, to revenue per employee, rental as a percentage of sales and so on.
Using an example industry that’s familiar to me, unfortunately, there’s not a major, ongoing benchmarking report for Australian bicycle retailers, but there was a survey run by Bicycle Industries Australia from 2014 to 2016. I’ll run a few summary findings from the most recent of those surveys at the end of this blog.
There’s something else you can do on an informal basis that can be highly valuable for your business. Find one or two other retailers who are not in competition with you and whose discretion and business ethics you trust. They could well be other dealers of your main bike brand, who are based a long way from your store, even interstate.
Then make a date for a call or better still a face to face meeting. It might only be once a year the day before your supplier’s dealer show, or via Skype or Zoom. It might be more frequent.
For the second half of the 25 years that we owned Bicycling Australia I had an arrangement just like this with another independent magazine publisher who was based 1,000 km away from me in Queensland. His business was about triple the size of ours, but otherwise very comparable, with a range of specialist magazine titles. None of our titles were in direct competition, but we faced the same challenges in terms of staff, printing and distribution costs, marketing challenges, how to build our subscription lists and so on.
When we met, most of the time we were simply benchmarking. ‘How much are you paying for your printing at the moment?’, ‘What salaries are your editors currently on?’ But we’d also discuss successful past strategies, new plans and ideas and so on. Both of us thought that this was time very well spent, otherwise we would not have continued to stay in touch until, in the end, we both sold our respective businesses.
If you don’t already have a similar relationship with a fellow bicycle dealer or two, I suggest you work hard to nurture one, of course being very up front with what you’re looking to achieve. Both of you will benefit!
Finally, back to that bicycle retailer report, here are some benchmarks from 2015/16, based upon survey responses from 78 stores, 57% metro, 43% regional.
Average shop floor space: 220 square metres.
Average number of total staff:
Full time: 2.0 male, 0.3 female
Part Time 1.0 male, 0.3 female
Casual:1.2 male, 0.3 female
Average number of mechanics on staff:
2.0 male, 0.1 female.
Average Markups, Margins and stock turns per year:
Markup number appears first (gross margin in brackets)
Bicycles before discounts 56% (36%)
Bicycles after discounts 47% (32%)
Bicycle stock turns: 3
Parts & Accessories before discounts 81% (45%)
Parts & Accessories after discounts 73% (42%)
Parts & Accessories stock turns: 5
Clothing before discounts 68% (40%)
Clothing after discounts 48% (32%)
Clothing stock turns: 3
Average annual store turnover: $863,875