Don’t underestimate the degree to which a business plan can enhance traffic, sales, and profits
You’ve heard the old chestnut that compares failing to plan with planning to fail? Well, it’s truer than most people think. And many experts say jewelers are especially guilty because they tend to avoid one tool that could guide their management decisions and grow their bottom line: a business plan.
Cindy Edelstein, president of Pelham, N.Y.–based Jeweler’s Resource Bureau, says most of what stops owners from developing a business plan is fear—fear that they won’t have time to tackle the project, or fear that they won’t know the answers to the questions that need attention, even if they’ve been in business for years.
But consultants as well as retailers who have taken the plunge and developed a business plan say putting together a written document that assesses their company’s strategic direction gives them an advantage.
Plans With Benefits
“I was just working as hard as I could to keep the bills paid,” says Aaron Capdeboscq, president of De Boscq Jewelry in Mandeville, La. After seven years in business, Capdeboscq realized he needed a business plan when the economy started to turn sour—only a few years after Hurricane Katrina struck the area. “Having the business plan has given us a little bit of an anchor we can look at for guidance,” he says.
If you’re just starting out, a business plan can be a necessary tool to bring to banks or other potential lenders, and you’ll absolutely need a well-articulated vision if you want to take advantage of Small Business Administration or other government programs. A business plan also helps you determine what kind of startup capital you’ll need.
If you already own a store, you probably know the size of the market and enough about the scope of the industry to skip this preliminary step. If you’re creating a business plan with the intention of presenting it to lenders, though, you’ll
want to include information about your startup capital anyway.
So where do you begin? Figure out what makes your business unique. “You have to find a way to set yourself apart from other stores,” says Andrea M. Hill, CEO of consulting company StrategyWerx in Milwaukee.
Determining and defining what distinguishes you from your competitors is the first step. Even if you’re the only independent jeweler in your area, you still have competition: Your potential customers are browsing retail websites and visiting chain and big-box stores.
“I’ve been in the industry for 20-something years, and I think the hardest part in writing the plan was finding a competitive edge, differentiating ourselves,” says Shawn Higgins, co-owner of San Francisco–based D&H Sustainable Jewelers. Higgins is a bit of a rarity in the industry in that he and his partner developed a full business plan prior to opening their store in January 2011.
Part of deciding what you want to be includes whom you want to target, Hill says. What does your target customer look like? Where do they shop? What do they wear? What are their passions—art, technology, family? You’ll be able to refer to this when detailing your marketing and merchandising strategies.
Spell out your financial goals. “My goal was to grow 10 percent a year, and the only way to do that is to project for salespeople, the store, advertising, and marketing,” says Patrick Pugh, president of Pugh’s Diamond Jewelers, Zanesville, Ohio. “We had to have some distinct goals, and to do that we had to get more organized.”
Hill says you should aim for at least double-digit revenue growth year over year. Set targets for yearly revenue and profit growth. Some experts recommend setting shorter-term goals for months or quarters.
Because big seasonal variations in sales are common in the jewelry industry, you’ll need to target time periods when you’ll have to boost profit even further to compensate for shortfalls elsewhere. If you employ salespeople, the business plan should include targets for them, too, says Pugh.
Write down your biggest challenges. Some might be within your control, while others, like the price of gold, aren’t. “Look at what’s going on in the economy, what’s going on with your competitors and the state of the industry,” says Jewelers Board of Trade president Dione Kenyon. “Ask yourself, ‘What are those outside factors that can impact my business?’?”
“Don’t fail to set a goal just because you don’t know how to do it right now,” Hill says.
Lay out strategies for achieving your bottom-line goals and addressing your challenges. “This is where people fall down,” says Ron Bill, CEO of Indianapolis-based Premier Consulting Services.
Keep the plan’s organization simple—Capdeboscq says he used a basic outline with heads and subheads—and be sure to analyze the following:
Start with marketing, since getting customers through the door is the first step. Figure out if you’re going to advertise via local media outlets such as newspapers or radio, use direct-mail campaigns to target your existing customer bases, host events like receptions or trunk shows, and so on.
Experts are divided on the value of couponing: Discounts can be a good way to drive traffic, but Hill warns that placing too much emphasis on price can send the wrong message to customers. Offering a low-cost service, such as replacing a watch battery or cleaning a ring, keeps you out of the discount trap.
Calculate how much your marketing initiatives will cost, and factor in how much extra you’ll need to spend on marketing during slow seasons.
The next strategy has to do with your workers. “Make sure you have the right people with the right skills and the right roles,” Hill says. This might involve a new hire, or training an existing employee.
It’s important that your staff is knowledgeable of and, ideally, involved in the business plan. “Most retailers want people to just come in and sell for them,” Bill says. Give staff members the tools to attain a career, and your business can benefit.
Merchandising is the third element your plan should address strategically. What do you stock, and where do you get it? Capdeboscq says devoting part of his business plan to his diamond sourcing helped him achieve profitability goals.
Knowing who your target customer is will guide you toward the kind of items you should stock, says Bill. “I met with a store owner a few weeks ago,” he says. The owner couldn’t understand why he wasn’t earning more, and Bill says he picked up on the problem quickly. “He’s in a perfect location, and I walk in and he’s got some really low-end stuff in there,” he says.
Hill says inventory management is a big part of this, too. Eliminating aged inventory and freeing up cash will help you reach your financial goals. “You need inventory-turn goals,” she says. “The jewelry industry has been kind of complacent about inventory turn.”
Although business plans are still a rarity in the industry, experts say retailers underestimate how much they can enhance your business. Don’t avoid creating a plan because you’re intimidated by what you haven’t done or don’t know, Higgins says. “A business plan is more of a dream book, and what’s interesting is when you write your dreams down, you create them,” he says.