Last week, I outlined ways to evaluate expense reductions against a retail strategy when tough cuts need to be made.
Let’s look at the other side where sales are above budget and there is the opportunity to purchase more than expected. Again, there has to be the same judicious eye to evaluate every spending opportunity as a chance to reinforce the strategic plan for the company. Too often, store owners are attracted to a new marketing idea: Let’s sponsor the town bike parade or invest in Google adwords or buy a billboard or take an ad in a local magazine. But each additional investment must be evaluated against delivering the core brand message that the company believes differentiates them from the competition. If your competitor sponsors the town carnival, that may not make sense for your shop. If you are targeting small businesses, it may make more sense to sponsor a coffee break at a local meeting of business owners than to participate in a parade.
What is critical is to create a budget each year and the strategy that will deliver the budget. The budget must be based in the strategy. The choice between investing in a website or investing in an employee training seminar are both great ideas. But only one makes sense if your strategy is to beat the competition by making each customer transaction an excellent experience that builds loyalty. It is normal for most businesses to have more spending ideas than cash during each budgeting cycle. Place the items that didn’t make the cut on a prioritized list. Share the list with your employees and let them know that if the budget is exceeded, those items can be reinstated. It’s a good way to develop employee engagement and make them feel their efforts tie into the overall destiny of the company.