Using the "Conversation Starters"
The best way to use these tools is with a retailer to literally "start a conversation" based on their financial statements.
If you want to try them out first, sit with someone else – anyone else – in your office. Even the most senior pros will see how these make numbers on a financial statement start to come alive.
1. Look at the "RETAIL KPI BENCHMARKS" tool
- Choose any retail vertical from the dropdown menu.
- Now, choose another one.
- And another.
"Well," a retailer would ask, "what are MY ratios?"
Bingo! Find out quickly with the KEY RATIOS Calculator. Just use that retailer's financial statement for the inputs.
(For your "test drive" demo, go online to get the financial statements of a publicly-traded retailer.)
2. Go to the KEY RATIOS Calculator
- From the retailer's P&L and Balance Sheet, enter numbers on the INPUTS tab for the most recent year available.
Note what questions come up when searching for those basic Input numbers on the financial statements. How easy is it for any of your clients to find these basic numbers on their financial statements?
- Go to the RESULTS tab; see the key retail ratios for that retail operation.
- PROFIT %
- GROSS MARGIN %
- Inventory TURNOVER
- GMROI
- CURRENT Ratio
- DEBT-to-WORTH Ratio
Once you open the RESULTS tab, invariably retailers will ask, "Are these good?" Another good question!
For immediate perspective, just compare to their vertical, using the built-in benchmarks.
To answer their question more fully, use the Financial Strength rater: How are they trending?
3. Scroll down to the FINANCIAL STRENGTH RATER
- In the left-most column, enter the ratio results for the most recent year you just calculated.
- In the next column, enter the ratio results for the prior year
Then, take your time to review what this tool shows.
- Note the "Trend" and the "Score" of each ratio
- Click the "Info" button for each ratio, for background, as questions arise
- Finally, see the Financial Strength score
These are business-discussions-waiting-to-happen. How is this retailer trending: up, down, or sideways? Where are they particularly strong? Where might be areas of vulnerability?
Now You're Talking!
Again, the point is not that the "Financial Strength score" is an absolute. No!
But it does prompt discussions. Questions. Quibbles. "Yeah, but..." And new insights.
All driven by the financial statement of a retail business!
For the senior management of any retail operation, these are powerful conversations to have; powerful insights to gain.
True, we call these tools "Conversation Starters." But they really are empowering new business relationships!