A Jewelry Joke
A man owned a small jewelry store. The State Work Force Department claimed he was not paying proper wages to his help and sent an agent out to interview him.
“I need a list of your employees and how much you pay them,” demanded the agent when he arrived.
“Well,” replied the jewelry store owner, "there’s my bench jeweler who’s been with me for 3 years.
I pay him $10000 a week plus free health care. My salesperson has been here for 18 months, and I pay her $750 per week plus free health care.
Then there’s the half-wit. He works about 18 hours every day and does about 90% of all the work around here. He makes about $300 per week, pays his own health care, occasionally he loans the store money and I buy him a bottle of bourbon every Saturday night. He also sleeps with my wife occasionally."
“That’s the guy I want to talk to, the half-wit,” says the agent.
“You’re talking to him right now, Sir,” replied the jewelry store owner.
Joke? Reality? Only you know.
How does something like this occur? The store owner is supposed to make the big bucks, right? How do you know the owner is underpaid?
If the store owner is underpaid it easily shows up with other problems in the store:
• Easily over ½ to ¾ million in sales a store owner should be paid approximately 10% of total store sales. There’s your first clue the owner is underpaid.
• Staff members are paid more than the owner (usually the jeweler).
• Credit cards are used to buy goods and services for the store (get free sky miles) but the card is not paid off every month.
• Accounts payables only go down at Christmas and always show the store is behind in paying vendors as promised. If we open the list there are unpaid bills going back 6 months
• The owner has loaned the company money, probably never to be repaid.
• Inventory in the case is old and stale; we can’t afford to buy the new hot items.
• Remember in the Charlie Brown cartoon there was this mess of a friend named “Pigpen”? He always had a cloud of dust surrounding him and his clothing and hair was disheveled.
If you were to go into his bedroom what would it look like? Neat and tidy or like a storm hit it? More like a tornado.
Same goes for this jewelry store. Their financial books are a mess; you can’t understand anything from their financials. Many times the checkbook has not been correctly reconciled in years and owner has to go to the bank’s website to see the true balance. Inventory in the POS is never correct. For the tax return the owner makes up a number to give the accountant.
What causes this? Looks like when we opened or bought this store and all we did was to buy a low paying job.
There are 5 reasons for financial distress in a jewelry store:
Charge too little for repairs and custom design.
**This is an easy fix, raise the prices or buy the Geller Blue Book to Jewelry Repair & Design. With a 90% closing ratio repair customers will gladly pay and those extra dollars fall into the checkbook.
Don’t have enough people coming through the front door.
**Advertising & Marketing. Consistent advertising is better than a few big splashes.
**Don’t forget marketing to your customer list, they love you. Email/call/direct mail to them.
**Invest more time and dollars in Social Media Marketing.
When they do come in the store the sales staff lets the majority of them walk without buying anything.
**Repairs typically sell 9 out of 10 people but product sales typically sell 3 out of 10 people.
**If you could sell just one more: 4 out of 10 people; you’d increase product sales 33%!
**Weekly 45-60 minute meetings to train will get you there along with paying incentives.
**All sales staff should be on some type of bonus system. Rewards instill new habits.
They have more inventory in stock than they should and a majority of it is over 12-15 months old.
**This is the killer of cash flow.
**Stores with excellent cash flow try to sell everything within 12 months (turn of “1”).
**Product over a year old is the problem and should be discounted, returned to vendor give spiffs to the sales staff or lastly scrapped for cash.
**Get rid of over a year old stuff so you can rebuy items or more items that sold within 6 months of buying them.
**Cost of inventory over a year old typically is equal to (give or take) to total debt in the financial statement.
They have the wrong price points. They tend to over buy higher priced goods (they are prettier after all) while customers buy the lower dollar end of the spectrum.
**Run reports to know these numbers.
**Return to vendor for credit to buy lower price points.
** If you can’t do that re-tag the older items and move them into lower price points to help get rid of them.
Do these and maybe you’ll be talking about how you’re also paying too much now in taxes! It works
Director of Store’s Profits