{"id":128,"date":"2015-03-14T23:09:43","date_gmt":"2015-03-15T04:09:43","guid":{"rendered":"http:\/\/openproduce.org\/blog\/2015\/2014-financials\/"},"modified":"2015-03-14T23:09:43","modified_gmt":"2015-03-15T04:09:43","slug":"2014-financials","status":"publish","type":"post","link":"https:\/\/openproduce.org\/index.php\/2015\/03\/14\/2014-financials\/","title":{"rendered":"2014 financials"},"content":{"rendered":"<p>Hello everyone!<\/p>\n<p>It&#8217;s been a while since we&#8217;ve really bared our souls on this blog, but it&#8217;s about time!  So I&#8217;ll be making a few posts over the course of the next month to get you up to speed on our finances, our challenges, difficult decisions, and our plans for the future.<\/p>\n<p>Let&#8217;s start with a quick look at how we did in 2014.  Let&#8217;s dive in with the simplified profit-and-loss:<\/p>\n<p><style type=\"text\/css\"> td {border-left: 1px solid #666; text-align: left; padding: 2px; padding-left: 5px; padding-right: 5px;} td.red {color: red;} th {text-align: left}<\/style>\n<\/p>\n<table>\n<tr>\n<th><\/th>\n<th>2008<\/th>\n<th>2009<\/th>\n<th>2010<\/th>\n<th>2011<\/th>\n<th>2012<\/th>\n<th>2013<\/th>\n<th>2014<\/th>\n<\/tr>\n<tr>\n<th>Sales<\/th>\n<td>$49,000<\/td>\n<td>$298,000<\/td>\n<td>$465,000<\/td>\n<td>$613,000<\/td>\n<td>$836,000<\/td>\n<td>$906,000<\/td>\n<td>$963,000<\/td>\n<\/tr>\n<tr>\n<th>Inventory<\/th>\n<td>$49,000<\/td>\n<td>$249,000<\/td>\n<td>$368,000<\/td>\n<td>$480,000<\/td>\n<td>$652,000<\/td>\n<td>$686,000<\/td>\n<td>$741,000<\/td>\n<\/tr>\n<tr>\n<th>Expenses<\/th>\n<td>$51,000<\/td>\n<td>$75,000<\/td>\n<td>$140,000<\/td>\n<td>$166,000<\/td>\n<td>$201,000<\/td>\n<td>$189,000<\/td>\n<td>$205,000<\/td>\n<\/tr>\n<tr>\n<th>Profit<\/th>\n<td class=\"red\">-$51,000<\/td>\n<td class=\"red\">-$26,000<\/td>\n<td class=\"red\">-$43,000<\/td>\n<td class=\"red\">-$33,000<\/td>\n<td class=\"red\">-$17,000<\/td>\n<td>$31,000<\/td>\n<td>$17,000<\/td>\n<\/tr>\n<\/table>\n<p>So, what does that mean in plain English?<\/p>\n<p>It means that after making $31k last year, this year we only made $17k.  Additionally, external to these simplified numbers, we paid our landlord about $3k in back rent (we both made an error last year in how much rent we owed), and also paid $5k to the IRS for a payment we apparently didn&#8217;t make in 2010 (you&#8217;d think they would have contacted us before 2014 about that&#8230;keep good records, kids!), plus interest on loans (about $6k) aren&#8217;t included in the above&#8230;so in reality we more or less came out even for the whole year.  Not great news, since we are trying to pay off loans and make a profit for ourselves!  Let&#8217;s look at a few reasons why:<\/p>\n<p><b>Sales did not go up much<\/b>.  We went from $905k to $963k, a jump of 6.4%, a little less than the 2012&rarr;2013 jump which was 8.4%.  But if we go back to 2011&rarr;2012, for example, the jump was 36.3%.  So, long story short, sales are still growing, but our growth is leveling off.<\/p>\n<p><b>Inventory expenses went up (as a percentage of sales).<\/b> Costs of Good Sold, or COGS, are the marginal cost of each sale (this is listed as &#8216;inventory&#8217; in the table above).  They are, essentially, expenses that you only incur if you make a sale.  For this reason, we usually express COGS as a <i>percentage of sales<\/i>, rather than in dollars.  For us, the main COGS is inventory purchases (about 73% of sales &#8212; for every dollar you spend at OP, we spend 73c just to replace that inventory), but there are a few other things like credit card processing fees (about 3% of sales).  In 2013 our COGS were 75.8% of sales, in 2014 they inched up to 76.9%.  One percentage point. might not seem like a lot, but if you&#8217;re grossing close to a million bucks a year, each percentage point is $10,000.  If we could get it down to, say, 70% &#8212; our goal &#8212; we&#8217;d have make $69,000 more in profit!  In a high-volume, low-margin business like grocery, even tiny adjustments to your COGS ratio make a huge difference.<\/p>\n<p>There are a few ways to improve the COGS ratio &#8212; raise prices, waste less produce, reduce shoplifting (not a huge problem for us), and find better deals from distributors.  Of course, of all of these, we hate raising prices the most, but ultimately raising them by 2%-3% might have to be part of the plan.<\/p>\n<p><b>After inventory, we had about the same amount of money to spend as last year.<\/b> After buying inventory (and all COGS), this year we had $222k to spend on fixed costs.  Last year we had $219k.  Basically the same, but&#8230;<\/p>\n<p><b>Fixed costs went up.<\/b>  Payroll went up $10k (about 7% &#8212; mostly raises, but also some extra hours).  Rent went up $2k (3%).  Electricity went up $2k (10%).  You get the idea.  Fixed costs jumped from $189k to $205k.<\/p>\n<p><b>So,<\/b> sales grew modestly, inventory ratio moved a percentage point in the wrong direction, and fixed costs all went up by a normal yearly amount.  Net result is we made less money, and all of it went to the special one-time expenses and interest listed above.<\/p>\n<p><b>Financial goals for 2015:<\/b> We&#8217;re not just bean-counters (ok, we do occasionally have to literally count beans), and there&#8217;s a lot of things we want to do with the store &#8212; expand our offerings, make Open Produce a better place to shop in, to work in, etc. &#8212; but it&#8217;s good to keep the bottom line in mind.  We&#8217;d like to get sales growth back into the double digits, get our COGS ratio down as close as possible to 70%, and, with the exception of continuing to give raises to our staff where we can, keep a lid on expenses.<\/p>\n<p>Sounds pretty easy, right?<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Hello everyone!<\/p>\n<p>It&#8217;s been a while since we&#8217;ve really bared our souls on this blog, but it&#8217;s about time!  So I&#8217;ll be making a few posts over the course of the next month to get &#8230;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"tags":[],"class_list":["post-128","post","type-post","status-publish","format-standard","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/posts\/128","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/comments?post=128"}],"version-history":[{"count":0,"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/posts\/128\/revisions"}],"wp:attachment":[{"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/media?parent=128"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/categories?post=128"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/openproduce.org\/index.php\/wp-json\/wp\/v2\/tags?post=128"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}