Another look at the numbers
A little over a year ago, I posted a simplified profit and loss showing our sales, inventory costs, other expenses, and profit (or loss) for each year. Here that table is again:
| 2008 | 2009 | 2010 | 2011 | 2012 (projected) | |
|---|---|---|---|---|---|
| Sales | $49,000 | $298,000 | $465,000 | $613,000 | $778,000 |
| Inventory | $49,000 | $249,000 | $368,000 | $480,000 | $518,000 |
| Expenses | $51,000 | $75,000 | $140,000 | $166,000 | $156,000 |
| Profit | -$51,000 | -$26,000 | -$43,000 | -$33,000 | $104,000 |
Since I posted that, we’ve finished off 2012 and had a great 2013. Here is a revised table, with real numbers from those two years:
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
|---|---|---|---|---|---|---|
| Sales | $49,000 | $298,000 | $465,000 | $613,000 | $836,000 | $906,000 |
| Inventory | $49,000 | $249,000 | $368,000 | $480,000 | $652,000 | $686,000 |
| Expenses | $51,000 | $75,000 | $140,000 | $166,000 | $201,000 | $189,000 |
| Profit | -$51,000 | -$26,000 | -$43,000 | -$33,000 | -$17,000 | $31,000 |
As you can see, 2012 did not go as well as we were expecting — and we’ll take a look at why that is. In 2013, however, we actually made money for the first time since we opened. Hooray!
So what happened in 2012?
Sales were higher than expected. About $58,000 higher. This is good! But not high enough to offset the other factors.
Expenses went up. I’m not sure what I was thinking, but I projected expenses going down by $10,000 from 2011 to 2012. Instead they went up by $35,000. That was mostly payroll (always payroll!) and a few big projects.
Inventory ratio didn’t go down. The inventory ratio (or COGS ratio) is the percentage of your sales that goes back into buying inventory. For instance, in 2011, we spent $480,000 on inventory and sold $613,000. Inventory was 78% of sales. This is best expressed as a ratio or percentage because inventory costs tend to vary with sales: if sales double, so do inventory costs (and vice versa). I had hoped to get this down to 65% or so in 2012, but this was not realistic. Instead, it was…78%.
In short, some rosy predictions didn’t come true.
And what went right in 2013?
Sales went up. But maybe not as much as they could have…there will be a future post on this topic soon.
Inventory ratio went down slightly. It fell from 78% to 76%. This means we raised prices a smidgen, found better deals from distributors, threw away less spoiled produce and bread, or suffered less shoplifting. Probably all of the above.
Expenses went down! By about $12,000. This means they were essentially flat from 2012, minus a few one-time expenses that didn’t happen again. Payroll was essentially the same at $140,000 for both 2012 and 2013 (and up from $32,000 in 2009!).
All in all, this lead to a profit of about $30,000 last year, which will make a small dent in the $150,000 we’ve rung up in liabilities of one sort or another. A few more years of that — or, hopefully, higher profits — and we’ll actually start taking home some money. Assuming Whole Foods doesn’t open in 2016 and wipe us off the map. No one said running a small business was a quick way to get rich.
A new post coming soon on sales growth and future strategies!