News from Minnesota Municipal Beverage Association

Minnesota Municipal Beverage Association Newsletter

(January 2, 2011 - January 8, 2011)

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2011 is here and we all should be ready for change.

As we all are aware, the possibility of our cities receiving any LGA in this year is unlikely. So as we have said over and over, our city leaders are going to be knocking on the doors of the liquor store for more funds to transfer into the city's general budget.

As managers we need to be flexible and open to new ideas.

In 2010, my store saved over $6,000 in salaries by changing our opening time up one hour.

Some of the cost saving ideas for 2011 that I am going to put into place are:

· Reduce my general advertising budget; I will do more co-op and event advertising, more specific should get me a bigger bang for my buck.

· Look at scheduling and the overlap of employees. I track sales per hour and can look back at what we did and schedule accordingly.

· My employees no longer have access to the cold and heat controls. This may seem like a minor thing, but this can save you $$.

· I changed credit card processors to US Bank Government Banking in 2010 and have seen a savings. I will continue to look for ways to save in credit card fees.

Revenue generating ideas for 2011:

· An ATM machine was installed. We hope to profit about $3 to 4 thousand dollars a year in transaction fees.

· Maximize the buying power on deals and only put things on sale periodically.

· Ask my vendors for free product instead of dealer loaders. We can sell free product and make a profit; we can not sell coolers, t-shirts, etc!

· Weekly tastings, every Friday we will taste out a new or existing product in the store and generate additional sales on products that the customers had not planned to purchase.

· EDUCATE! My employees will be more educated on wines and new products. They will get out on the sales floor and hand sell to our customers.

I look forward to the challenges and victories in 2011. I hope you do as well. If there is anything you may have questions about or an idea you are thinking of trying, just remember.......you will never know if it will work unless you try!

Lara Smetana, Voyageur Bottle Shop (Pine City)

Superior Customer Service

By Barbara Wold

1. Always try to exceed customer expectations. You must have a strong understanding of customer needs as these dictate expectations. Conducting a customer service focus group and talking with your customers often will provide you with a true understanding of these needs.

2. Track changes in customer expectations and experiences often and over time. Any successful company must learn to identify and adjust quickly to changing trends, many of which will be reflected in customer expectations.

3. Make a strong first impression. The first contact with a customer often sets the tone for their lasting impression of the company, this includes Facebook, Twitter, social media, blogs, etc.

4. Be accessible, approachable and responsive. If your customer finds it difficult to get in touch with your company -- the prospect of developing a strong, long-term relationship built on customer service satisfaction is greatly diminished. Make a habit of regularly reaching out to your customers to enhance customer service satisfaction and build lasting relationships.

5. Determine how well your company delivers. Initial customer satisfaction research will provide a baseline against which to measure future improvement initiatives.

6. Solicit input from your service personnel and front-line staff. Most public-contact employees are self-motivated to achieve customer service satisfaction. They are the best source for identifying roadblocks to superior service delivery. Spotlighting and addressing these issues not only improves customer service satisfaction but employee attitudes as well.

7. Improve employee satisfaction. Regularly conduct an employee attitude survey to measure and improve employee satisfaction. This will, in turn, have an impact on customer service satisfaction. More satisfied employees will provide a better service experience to your customers.

The Importance of Gross & Net Profit

Many MMBA members focus on overall sales to determine success. In reality, it is net profit that is most important, not sales.

A key to successful NET profits is the monitoring of GROSS profits.

Recently, a member asked about determining and analyzing gross profit and the relationship to net profit.

Here was our response:

Gross profit is the total revenue subtracted by the cost of generating that revenue. In other words, gross profit is sales minus cost of goods sold. It tells you how much money a business would have made if it didn't pay any other expenses such as salary, income taxes, office supplies, electricity, water, rent, etc.

You can get by with a lower gross profit -- you just don't have as much money to spend on expenses. Plus this number can be impacted depending on the amount of off-sale and on-sale in your total sales.

For example, another member has a high gross profit of 50% -- but that is because they have large on-sale revenue. However, due to high expenses their net profit was suffering.

Another member on the other hand, has a lower gross profit. Here is what we told them...

Your sales distribution between on-sale and off-sale continues to widen. In 2009 16% of your sales were in the on-sale and 84% were in the off-sale. In 2008, 18% was on-sale and 82% was off-sale.

This gap is reflected in your gross profit and labor percentages.

Gross profit was 27% in 2009 and 29% in 2008. This number is high for an off-sale only facility, where a good number is 24% - 25%. However, it is very low for an on-sale / off-sale combination facility, where a good number is 42% - 45%.

Labor as a percentage of gross sales was 20.7% in 2009 and 2008. This number is below the standard high of 25% for combination facilities. However is very high for off-sale only facilities, where the maximum is 10%.

Here is an example from your past financial statement:

Sales = $1,149,355

Subtract Cost of Goods Sold = $716,982

Equals Gross Profit = $432,373

Divide $432,373 by $1,149,355 Equals Gross Profit Percentage of 37.6%

As we discussed at the Regional, it is all about making money. Therefore, in the same report you indicated a very high net profit percentage of approximately 11% (Gross profit of $432,373 minus expenses (labor, utilities, supplies etc.) of $303, 831 equals $128,542 net profit.

For net profit percentage: Take the $128,542 net profit divided by total sales of $1,149,355 = 11.18%. (Note: Officially your net profit was 11.4%, but this included non-operating revenue.)