Often, retail business owners invest a great deal of time and resources into their marketing department. They're always looking for ways to attract more customers, increase their brand visibility, and boost their sales. While this is undoubtedly crucial, there's another department that deserves equal attention, if not more - the finance department.
Understanding your finances is more than just keeping an eye on cash flow. It's about strategically utilizing financial resources and optimizing your financing options to catalyze your business growth and profitability. Many retail businesses have a marketing department with well-defined KPIs and consistent tracking, yet when asked about their finance department, the response is often silence.
It's not enough to merely have a finance department. You should be actively engaged with it, just like you are with your marketing. That means knowing your approval and closing rates, understanding what they imply, and actively working to enhance them. To get the most out of your financing department, ensure you have someone dedicated to maintaining relationships with lenders and tracking data related to loan applications and approvals.
Recognizing the close ratio of your business, the percentage of approved deals that are successfully closed, is another element that is often overlooked. Surprisingly, this number often falls far short of 100%, but by providing the right training to your team and monitoring individual performance, you can aim for a close ratio of 80% or better.
The key takeaway here is to treat your finance department with the same focus and importance as you would your marketing department. With this shift in perspective, you will likely see a remarkable transformation in your retail business's success.
Action List
- Establish a Finance Department: Identify a dedicated person or team to handle your finances. This person will manage relationships with lenders and oversee loan application processes.
- Build a Lender Lineup: Aim to have about five lending options to cater to different credit profiles of your customers. Keep revisiting this lineup to ensure the best match for your customer profiles.
- Track Your Data: Monitor key metrics like the number of applications received, approval rate, and close ratio. Focus on improving these metrics to enhance your financial efficiency.
- Improve Your Close Ratio: Invest in training your team to enhance their sales techniques. Monitor the close ratio of each team member and share best practices to drive improvement.
- Set Goals: Establish tangible financial goals for your team and maintain a focus on them.
- Motivate Your Team: Implement incentives to motivate your team to hit or exceed the set targets.
By implementing these actions, you can create a robust finance department that actively contributes to your retail business's success.