Whether you’re the only shop in town or just the only shop on your block, you’re still going to want to know how you stack up against the competition and how your business is improving. Bruce Winder, retail analyst and consultant, says managing a business is like being an air traffic controller—you have to know what’s coming in, and what’s going out.
“It’s always better to have a plan and change it,” he says, and the better the plan, the better set up your business will be for success.
Knowing how to benchmark your performance as a cannabis retailer can seem overwhelming, and it is, says Winder, but setting educated goals and working with your team to reach them can be both satisfying and lucrative.
According to Colin Derby, CPA at Brandolier, the first step to determining benchmarks for your business is finding accurate data that applies to your specific store. If you can afford it, there are informative and easy-to-understand data providers like Headset or BDSA, but there are plenty of free resources as well—if you know where to look.
“One good thing about cannabis is that the data collection is so regimented,” says Derby, referring to Statistics Canada’s monthly retail sales reports and quarterly inventory reports. “It may be delayed, but that’s valuable, free data that you can use.”
Not only that, but the previously mentioned analytics firms often offer free reports, and publicly traded companies are required by law to disclose their financial results each quarter. You can adjust the data to fit your situation based on different factors like location, proximity to competitors, and whether you were there first. At first, it can be difficult to understand, but once you wrap your head around how others in the industry make money (and how much), it will be easier to create a solid plan of your own.
Determining Your Bottom Line
Once you’ve got a good foundation of data, it’s time to plan.
“At the start of the year, sit down and really plan it,” Winder suggests. “Use your Excel spreadsheet and plan everything out: what do my revenues look like? What did I do last year and when? Plan your sales every day, which equates to cash flow every day, every week, every month so you know when revenue comes in. Plan exactly when expenses go out and then look at the difference so you can get in front of it.”
Track everything daily, weekly, monthly, and yearly, so that you can see the trends.
It’s easy to fall behind, so the key to success is to keep up with it. Check it every day and track everything daily, weekly, monthly, and yearly, so that you can see the trends. While more data is released every month, cannabis is still an emerging industry and yearly trends aren’t as easily available as in other retail categories. Some POS software can help you track common key performance indicators (KPIs) like basket size, inventory statistics, and other standard metrics.
Once you see the trends, you can see where your averages fall and determine your benchmarks from there.
Making it Efficient
Seeing everything laid out on paper can put your business’s performance into perspective. What if it’s not where you want it to be?
First of all, check your expenses, explains Derby. “As competition increases, you have to make sure you’re not leaking money.”
Once that’s under control, you can start tweaking your retail operations to make them more efficient. For instance, consider changing up your store layout. Retail giants like Winners and Walmart lean into impulse buys and little add-ons leading up to cashpoints to tempt shoppers into adding more to their baskets.
You can grow your bottom line exponentially by upselling lighters and rolling papers.
“Accessories,” suggests Derby. “Retailers often overlook this. You can grow your bottom line exponentially by upselling lighters and rolling papers—little things that have a high margin for your store.”
Accessories are also easily branded, making them a compliant way to further your brand.
Derby challenges retailers to look a little bit deeper, as well. “Know your top 10 and the sales averages on the national scale when it comes to inventory,” he says. “If your store doesn’t match up, ask why? If the rest of the country is selling 19% concentrates and you are selling 50%, is it because more of your customers use concentrates, or do you have a bad selection of something else?”
He encourages retailers to get into the nitty-gritty of the data to see where things can be improved. Switch up your product mix occasionally, but don’t forget about your regulars and don’t ignore the data in front of you.
“Sometimes your niche comes to you and you can see that your community is buying certain things,” he says. “Those are your people and they are going to keep you afloat.”
After the planning stage comes the doing stage. How will you make your benchmarks a reality?
First, make sure your goals are good ones by following the tried-and-true method of making them S.M.A.R.T.: specific, measurable, attainable, realistic, and timely. That means using your data and benchmarks to set out goals with specific targets that aren’t too aggressive, with ways to measure them in a certain timeline.
To make sure you work on achieving your business’s benchmarks, involve everyone. Budtenders should be educated in this mindset to help them understand what success means for the business, at least on the numbers side.
Of course, each transaction is meant to connect a customer with the right product. Hosting daily contests for who can upsell the most branded lighters, or who can sell the most expensive accessory can be a great way to cultivate this mindset and have a little fun at the same time.
Meeting and exceeding your benchmarks can be incredibly rewarding, both financially and as a business owner, but remember that the industry is constantly changing so your benchmarks will be changing as well.
“Guess what? Nothing happens according to plan,” laughs Winder. “It’s never a static situation. It’s just about steering the ship on a daily, weekly, and monthly basis.”