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Business Plan update?

B. Newman

SGF, Supreme Grumble Framer
Bob, you asked about an update on the mirror pricing question, that made me think, how about an update on the business plan project you were writing?

I spent 9 hours today at a strategic planning session for the Foothills Craft Guild. I was looking forward to it for 2 reasons. First, the Guild needed it, but second, I wanted to see how one was carried out. It was great. We did short range goals, and long range goals. We looked at "pie in the sky" goals. We looked at strengths and weaknesses, and implementations. And I came away with as much for Newman Valley Studio as I did for the Guild.

Anybody ever done one of these for your own business (not your past life.)

Betty
 
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Bob Carter

SPFG, Supreme Picture Framing God
Betty-I have a rough outline done and expect to present it to the PFM people at Atlanta. It's pretty basic stuff-sorta like what do you want to be when you grow up (in business) and how do you plan on getting there.

For strategic planning, we used to do 6 mon, 2 yr and 5 yr plans. As ideas would germinate and develop they would move from the 5 yr to the 2 yr, then the 6 mon with appropriate action taken at each stage. It was most helpful as we were in our store growth period, not as critical or pressing now. By doing some long range planning, you could prioritize those issues with time to complete instead of everything piling up at the last minute. It was a way to keep the creative juices flowing, also.

I've also been asked to prepare a multi-store expansion plan (done that a gazillion times, it seems) for the PPFA convention in March. I think another great candidate for this would be Marc Bluestone. His plan follows the more conventional wisdom for the majority of the industry. I doubt if many (any) would follow my example.
 

gemsmom

SGF, Supreme Grumble Framer
Two years ago I decided that I should start to set up the stores for sale in anticipation of retiring. I wasn't going to sell the shops together, so I had to make them independant of one another. I also wanted to work less, and increase profit. My goals have taken two years to achieve (all excepth the retirement part), but I work fewer hours, have increased profit, and the stores can run independantly. My husband will be talking to the manager of our second store in a couple of weeks, as she is interested in purchasing it if we can strike a deal. Now I have to work on the retirement part. My husband says I'm too young to retire, but that is my next goal, and I am giving thought as to how to achieve it. Setting goals is easy, achieving them is the tricky part. But one needs to set goals in order to grow.
 

Bob Carter

SPFG, Supreme Picture Framing God
I have a feel for her plans. But I think she would do the rest a favor by sharing what her plans were and how she executed them. She has a keen sense of business and has much to offer the majority of grumblers.

I think many would benefit from her experience. Many could learn from her plan-it is so typical of the "identify, plan and execute" model of management (and she thought she really wasn't a businessperson)

I hope she expands on her model. It's worth sharing, I promise.
 

gemsmom

SGF, Supreme Grumble Framer
Bob, I take your encouragemet as a complement. The thing is, you write a businss plan. I just had goals, a starting point, and one thing led to another. I had a warehouse I closed and stopped cutting (most of) my own moulding. Even though the warehouse was cheap by retail standards, I cut out the rent, two employees immediately, trash collection, and a phone bill. I saved $1,200+ a month right away. The second store had room for a small saw, and some length, so that went there. Each store assembles its own frames now, and mine works mainly from chop. I used to accept volume frame jobs. I stopped. They were boring, I had to work extra hours to complete them, and the profit made was not worth putting the extra time in. I would also need the warehouse to continue to accept them, and the benifits of not having the warehouse outweighed any arguments I could think of to keep the warehouse. As the length moulding sold out, I noticed we were selling more of the "better" mouldings. I think conciously or subconciously, we tend to sell what we have, or feel we need to get rid of. I kept ordering more samples of the "better" mouldings. Customers bought them, and completly ignored items I carried for years as a "price point"(these are now GONE). The average price per foot of moulding has increased steadily and substantially over the last two years. This increase in ticket encouraged me to try closed corner frames. We are selling them regularly in both stores. I am aso saving many hours by not having to inventory the length. My manager and I also have taken several seminars locally and at trade shows. We learned a several things that have helped, but I feel if we just got one thing out of a class, and we alway did, the time and expense was worth it. A big time-saver for me is the CMC, no question about it. We also made a decision to be framers only. We cut out original art and gifts. I still have posters, but the books are gone from the floor. I want to get work done, not stand and help people look for prints. I found that the ones who ordered from the books didn't frame what they bought, but those who bought what we stocked did frame the print. This is just my observation, and may not be the same for everyone. I'll tell you, I have learned alot more in the last two years than I had in the previous 16. Nobody could have convinced me 4 years ago that how and what I sell now was possible. Our profits have increased dramatically, and I work four days a week most weeks. Okay Bob, you asked me to expand, and did. I don't know if any of this will help anyone, but I can guarantee you that the shop I ran for years was just like many others out there. It was only after I decided to buckle down, take a good look at things, and make some drastic changes that things really changed and became better than it already was.
 

Bob Carter

SPFG, Supreme Picture Framing God
I think Pam's answers are concrete and solid. Who couldn't learn from that. And a point she maybe overlooking is that her thought processes have changed. It's not just show up every morning and get the work done. She now looks for efficiencies, she looks for return and she looks for profits.

All in all, she is becoming a very solid businessperson. All the while , not giving up one centimeter of her framing skills. Remember, she won the National framing Competition.

It looks like she has her cake and is eating, too.
Congratulations
 

B. Newman

SGF, Supreme Grumble Framer
Originally posted by PAMELA DESIMONE,CPF:
Bob, I take your encouragemet as a complement. The thing is, you write a businss plan. I just had goals, a starting point, and one thing led to another.
Uh, a business plan by any other name....

Pamela, thank you for sharing all that. I have read and re-read it many times. There's lots of wisdom there.

I think I shall print it off and add it to the "What industry are you in?" article in PFM this month. I think you have found yours!

Betty
 

evergreen

Grumbler
Originally posted by PAMELA DESIMONE,CPF:
This increase in ticket encouraged me to try closed corner frames. We are selling them regularly in both stores. A big time-saver for me is the CMC, no question about it.

Pam, are closed corner frames the same as 'ready mades'? I don't know what the CMC is.

I posed some business questions on the Warped forum (Yes, that was the wrong place)and your comments are the kind I was looking for. I've been in business for years. In the framing business for only a year after a year of searching for a career change and six months of framing classes. Any other things you've learned along the way - like some really big mistake you made the first couple of years in business? Thanks!
 

B. Newman

SGF, Supreme Grumble Framer
Evergreen, we tend to use terms like POS (point of sale) and CMC (computerized mat cutter) without thinking. We forget that there was a time that a "hinge" was just something on a door in our minds. We forget "from whence we came." Sorry.

I'll let Pam explain the "closed corner" frames for you.

Betty
 

evergreen

Grumbler
Betty, thank you for the CMC definition! Boy, just when I feel like I'm catching on to the Grumble some of you throw in the 'framanize' lingo that make me feel like the 'little sapling' that I am! Evergreen
 

gemsmom

SGF, Supreme Grumble Framer
evergreen, I use the term "closed corner" in reference to any finished (seamless) corner frame. They are not "ready-mades" in the way you are referring. They do come from the manufacturer assembled. The ones I sell are not the cheap impored kind, but the hand-finished type of 12k-22k gold, metal leaf, or any hand-finished fine wood, seamless frame. These are not something you can just jump into. It took me time to develop the clientele who would purchase upper-end moulding. I decided the time was right for me when I started regularly selling chop moulding at $20.00' a foot and more for narrow frames, and $40.00' and more for more substantial frames, without the customer flinching, so to speak. Selling upper-end can be done, but it takes time, there is a substantial investment involved, and your location and customer base are of utmost importance.
Biggest mistake? Giving it some thought, I would say trying to be something I wasn't or didn't have the skill to be. If you read Jay Goltz's article "What Industry Are You In?" in the last PFM magazine, that was me for many years. Everything fell into place when I decided to concentrate on framing and the framing business exclusively.
Some advice I could give. Many of us work so hard on our framing skills, we forget to hone our selling skills. More money can be made or lost right at the selling counter than you can imagine. It is not just what we sell, but how we sell it. Every trade show has seminars on selling, and books are also available.
Try to attend at least one trade show a year. New York is very expensive, but the others can be done fairly reasonably. The education alone is worth the trip. Another trade show benefit are the specials available. You will get a break on anything you buy. I always saved my big purchases for a trade show. At a trade show you will be able to compare CMCs, saws, choppers, POS hardware etc., absolutely anything you may need at the time or in the future.
On another thread it was chopper vs. POS. I agree with Goddess Edie, POS hardware first. I used to cut alot of my own moulding, and there are arguments for and against. Having done both, I prefer chop.
 

David N Waldmann

SGF, Supreme Grumble Framer
Originally posted by PAMELA DESIMONE,CPF:
Another trade show benefit are the specials available. You will get a break on anything you buy.
One of the most valuable things I have gained on this forum, as a manufacturer/distributor, is a framing businesses fairly candid view their suppliers.

We have only once offered a special at a show (granted, we have only been to a major show 4 times). We decided, pretty much the same as most of you have, that sales are a marketing gimmick for the big boxes... just offer exeptional products and services at a fair price and the world will beat a path to your door (well, OK, it's not quite that simple ;) )

BTW, my first statement is also reciprocal. It has caused me to think about our customers trying to do the same thing we are - making money.
 

gemsmom

SGF, Supreme Grumble Framer
Maybe you don't give a "show special" at trade shows, but I can guarantee that most companies in attendance do. You've done four shows, I've been to at least 24, so I think I can speak with some authority. Yes, you have a good product. But, if I saw it at a show and no special were offered, I would probably pass, unless the product is so unique, I just "had to have it". Reason, I can get it anytime. One of the reasons I go to trade shows is for the specials, on items I want to try and items I already carry, but at a better price than I would normally pay.
 

Bob Carter

SPFG, Supreme Picture Framing God
I agree with Pam, whole-heartedly. The shows are a great way to see what's new and what's on sale. Specials are as much as the show fabric as are the classes and eating and drinking too much.

But Dave's assertion on No Specials strikes most framers as odd, much the same way most framers will never run specials or discounts strikes me as odd.

We live in a promotion-driven economy. Everyone is looking for a deal. From airfare to hotel rates to equipment and purchases at the show. And we all feel good knowing we got a "deal". What makes our customers any different?

I know this will raise the hackles on most framers thinking of discounting or running anything on sale. And please, the arguments are as old and tired as I am.

So, let me agree that most should never run any sales or promotions. Not because they are evil or wil destroy your business (because they can); but because most don't have a real understanding of how to use them effectively.

There are two conditions that must be met if you anticipate a sale-driven promotion: 1) It must generate more sales volume than if you didn't run the promo, and 2) you should buy effectively to protect your margin.

And that's where the show specials come in, big time.

Let's say you walk into XYZ readymade booth. You carry their line, but if you buy a certain amount, they will offer 20% discount. You buy the product and run a sale at 20%off-you have protected your margins, and hopefully increase your sales by more than 20% of the same sale period for readymades. You have a happy customer, increased your sales and if you were a smart retailer, bought extra product at that reduced cost to sell at regular price for increased margins later.

Now, let's assume this extra business with XYZ also increases the possibility to put you into a more favorable pricing structure for other purchases. And maybe you run this sale a couple of times a year, also increasing your business (and importance) with XYZ. It happens all the time.

So in this simple example, you have an effective program that pretty much every other retailer does(and is expected by pretty much every consumer out there). The example can carry forward to any product, any line, any retail item. But only if used judiciously.

The harm? When we put something on sale without any margin offset, or worse, when we allow the client to select what they want at reduced price (you know 30% off framing, that type of sale). If you use "set and forget" pricing based on cost, and you reduce it, then you have lost margin (Read:Gross Profit Dollars)and you never catch up.
But if you buy effectively (and show specials are a dandy way to do this)then you can effectively use that buying advantage into a selling advantage while protecting margins.

Sounds pretty simple, huh?

It's just what every other retail trade in the same marketplace as you does to attract customers. We ought not be so afraid of it. But, we ought to be very, very afraid of doing it poorly or without some margin protection afforded by smart buying.

I'm with you Pam-we look for specials all the time.
 

David N Waldmann

SGF, Supreme Grumble Framer
Originally posted by Bob Carter:
I'm with you Pam-we look for specials all the time.
I think we all look for specials. I just found it interesting that while it seems that most of the "big names" and the vast majority of what I think of as "good framers" - those who operate their framing business as a money making vehicle rather than a I-love-what-I-do enterprise - have a death-wish on sales (when giving them anyways).

I also find it interesting that "Specials are as much as the show fabric...". Why, when someone spends tens of thousands of dollars on what it takes to go to a show, would they then further discount their product? I can see that if this is the primary way you garner new customers it could be cost-effective, but it seems extremely expensive to me, unless it's the ONLY way, because everyone else is doing it. If so, then everyone (who offers or depends on show specials) is contributing to unnecessary increased cost of the framing industry.

Bob, I do appreciate the insight you give about sales in general. However, I'm not sure where a manufacturer can take advantage of the two criteria you set for having a sale. The first one, fine. But number two is pretty hard. Our two biggest costs are raw material (lumber) and labor. OK, forget labor - we aren't going to get a reduced price on that ;) . That leaves us with lumber. With the occasional rare exception, the only way to buy lumber at a discount is to buy the stuff nobody else wants. Like short lengths, stained, or re-dried. Then the product you are making/selling is no longer the same, and a concientious company won't be able to say "Hey look! We've got a sale on ItemXYZ (fine print: it's not really the same product you usually buy)".

I hadn't thought of it in terms of a structured "sale", but our business consultants went over this concept quite extensively when we had them in a couple of years ago. They went one step differently than you did, maybe because we're primarily a manufacturer rather than a distributor or wholesaler. They told us that the overhead contribution is negotiable in determining your costs, IF your break-even has already been met. This is the only place where I can feasably see a sale for someone like us (more on this further down).

If a company regularly or frequently has a sale, you almost NEED to buy when they have a sale, or you are paying more than you should at "regular" price. This is because somewhere up the supply chain someone is robbing Peter to pay Paul. In the example of XYZ offering 20% off for a certain amount, you cover what happens at the purchaser's end, but what about XYZ company? They had the expense of going to the show, and then the expense of giving 20% off. Let's say that their vendor is a manufacturer who gave them a special so they could do the show special. Going back to my rule about manufacturers, they are going to have to make up the extra someplace else, which artificially raises their standard prices.

And who is going to pay for that? You, the customer.

Even if the manufacturer can take advantage of cost efficiencies and reduced overhead from extra production, if the "special" is a regular thing (say, yearly) then in reality, the manufacturers numbers weren't done right in anticipation of this regular thing, and therefor the "special" is only possible because they have been charging enough extra in the year leading up to it.

I guess the bottom line is, as long as people offer specials you should take advantage of them, and let the people offering them worry about whether they should be offering them, and what impact they have for them.
 

Bob Carter

SPFG, Supreme Picture Framing God
Hi Dave- I really agree with your premise; if you establish pricing through cost accounting, then to offset a reduction, you must make it up through volume to maintain Gross Profit Dollars. And we know in this industry, that's not an acceptable alternative.

But, if your pricing is market-based and you are efficient, then you might have some "wiggle room" available. I don't know wish to know enough about manufacturing to have an answer. But I do know that discounting is readily available from almost all vendors based on many factors, most of all, volume.

But it's not about macroeconomics-it's about retailing and specifically, retailing in a most challenging market. It is about trying to do something that creates identity and demand, when unfortunately, the rest of the market has conditioned the consumer to expect certain things. It's just the environment we have to compete in. And, I'm sure you do on a wholesale level, as well.

My only suggestion is that specials are a fact of shows and we, as retailers, should look for ways to help us stand out in our markets. The same specials we look for are the same specials our retail consumers look for when they come into our stores.

I absolutely don't expect anybody to do what I do or promote they way we do. It's a matter of personal judgement; we all need to run the businesses the way we know best. My post was designed to help those that might be able to turn this buying advantage into a selling advantage.

But I agree entirely that if your pricing structure is cost-based, and you have priced items to a specific price based on a specific return, then discounting is the surest way to not meet your Gross Profit Goals.

Unfortunately, this is one of those things that you just won't find discussed in our trade-except in the negative.

Those of us schooled in Retailing have just been taught both disciplines. I'm trying to introduce a little of the other side and this is in no way preparing anyone to take this as easy or simplistic
 

David N Waldmann

SGF, Supreme Grumble Framer
Bob,

I have to thank you for giving me another perspective. Although I have never done any retailing, and thought that retailing concepts were not applicable to me, I can see that I do need to at least understand some of the basics to do a better job of wholesaling.

I have heard and seen espoused market-based pricing many times before, but have never been able to embrace it. I have a hard time dealing in the abstract, and have always felt that prices should be based on what something costs, not what someone thinks it's worth (talking about currently manufactured consumer goods - not antiques or collectibles!). I can see I may need an adjustment.

Again, Thanks.
 

Jason Maranto

CGF, Certified Grumble Framer
My assumption about manufacturers and special pricing is that it would only be practical in two scenarios:

1) You have a new product for which you know people would like if they just gave it a chance - by offering a reduced price and taking the loss in the short term you may successfully "up" the level of market acceptance for your product in the long term. This is a gamble on your product.

2) You have a product nobody wants, but you need to get rid of it to clear up warehouse resources - reduction of price is artificial in this case as the work and materials were likely done at a lower cost than the current value (after repeated line-wide markups)... and you free up valuable resources for successful products. A win-win situation.

Best,
Jason.
 

gemsmom

SGF, Supreme Grumble Framer
I just wanted to add something. I used to buy length moulding. If I bought at a show, I could get a better discount, more like what big operations would get all year long. The distributor was selling to me for less than he normally would, but he was certainly not selling for less than he would to someone who bought large lots all the time. It just means the smaller vendor can buy a little more like the "big guys" a couple times a year.
 

Bob Shirk MCPF

CGF II, Certified Grumble Framer Level 2
Bob,

Another component of sales (dicounted prices) that should not be overlooked is a sale ending date. This helps to create a sense of urgency in the customer to act promptly.

We have successfuly used sales in our gallery to sell framed samples off the wall. Our customers get a bargain and we update our samples.
 
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