Track the Right Numbers to Reach Your Q2 Goals

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Why you need to know your numbers

Catherine Erdly: It is April, which means that we are in the start of the second quarter. Can you believe that the first quarter of this year has already gone past?

Hi everybody, it’s Catherine Erdly. I’m your host today as well as the founder of the Resilient Retail Club. That is my membership group, mastermind, and done for you services for retailers. Head over to resilientretailclub.com to find out more.

So today I wanted to talk to you all about the second quarter and specifically knowing your numbers for the quarter ahead. So why is it so important for you to get a handle on your numbers? Well, this is the perfect time for you to get a fresh look at your numbers and to start thinking about how you’ve been performing in the first quarter, what you want to do in the second quarter, and then basically making any adjustments.

Now, I know not everybody’s business is centered around Christmas, but for a lot of people it is. And if it’s not Christmas, then you might get a bit of a bump for back to school in September. [00:01:00] Some people, obviously their peak is coming up in the summer, but for a lot of people the second quarter is a little bit quieter or maybe not like a full on sales quarter.

And so for a lot of people, this is the perfect time to be spending a bit more time looking at your business. And the way I like to think about the second quarter is that you hopefully put your plan in place for the year. You’ve now seen the results of that in the first quarter. You can then kind of look at that, adjust, make some plans for the second quarter. And then also into the year ahead.

What I’m gonna be talking about is the numbers that matter, the metrics that you should be tracking, and then how to use that to plan out the next 90 days.

Catherine Erdly: Welcome to the Resilient Retail Game Plan, a podcast for anyone wanting to start, grow or scale a profitable creative product business with me, Catherine Erdly. The Resilient Retail Game Plan is a podcast [00:02:00] dedicated to one thing, breaking down the concepts and tools that I’ve gathered from 20 years in the retail industry and showing you how you can use them in your business.

This is the real nuts and bolts of running a successful product business, broken down in an easy, accessible way. This is not a podcast about learning how to make your business look good. It’s the tools and techniques that will make you and your business feel good. Confidently plan, launch, and manage your products, and feel in control of your sales numbers and cash flow to help you build a resilient retail business.

So again, why do you need to have a clear idea of your numbers? Well, I really believe that when people talk to me about their businesses, one of the things that people will say is that they’re really tired of winging things.

And for me, when people talk about winging things, it usually is this feeling of lack of control. [00:03:00] So, you may be running your business by looking at how much is in your bank account as opposed to having a clear cash flow plan, and it can feel very much when you’re in that situation where you don’t have a clear plan or clear idea of what you want to take.

It can feel very much like your business is happening to you. So every day you are checking, right, what bills have I got going out? Or you get that invoice come in that you have to pay. You get that bill auto debiting out of your account and you weren’t quite expecting it.

Or you realize you need to place an order with your supplier, and that means a big commitment to stock that you just didn’t really, you gotta kind of shuffle things around or a tax bill, things like that.

So it can feel very unsettling and it can feel very much like, as I said, something that’s happening to you. And when you get into that situation where it’s something that’s happening to you, you can start becoming much more reactive and less proactive. So you are just reacting to what’s happening and you’re not taking control, seizing it.

And saying, right, this is what I think is gonna happen. Let’s put a plan [00:04:00] in place and then let’s look at those key numbers and understand where I’m at compared to my plan. So the difference is going from feeling like you’re in that rollercoaster to feeling like you’re in the driving seat. And that’s what really knowing your numbers is all about.

Not to mention that winging it just gets really stressful. Especially if you’ve got tight margins or you’ve overstocked or you are got big overheads that you have to meet. You know, I always think about cash flow as being like a path that you can walk through your business. You need to walk through your business, and you need to weave around the money coming in and the money going out, and make sure that you are staying on the right path without running into too many pitfalls.

But if you don’t have an idea of how much you’re planning on having coming in and how much you’re planning on having going out, then it just feels really chaotic and it feels like you’re trying to walk a very narrow path blindfolded. So having a data-driven business, or at least knowing what key numbers to keep an eye on can really make a difference.

So being really clear about your numbers can really make a big difference, and it can make you feel much more in [00:05:00] control.

It also means that when you’re keeping an eye on the data in the business, it allows you to make better decisions, whether that’s decisions around pricing, whether that’s decisions around promotions that you wanna be running, stock purchasing certainly helps you to make those decisions.

Hiring people, committing to costs, whatever it may be. All of that is so much easier to do if you have got a really clear plan. The best numbers, the business numbers, the reason I talk about this so much is that I believe that good numbers give you insight before a problem escalates. And it’s the closest thing you’re gonna get in your business to a crystal ball.

You don’t have to be a pro at finance, but you do need to understand the story that your numbers are telling you and be prepared to make some adjustments.

The key numbers you need to know

Catherine Erdly: So what are the key numbers that you need to know? This is a question that I get asked a lot. So what should you be keeping an eye on? Well, firstly, I’m a big fan of keeping it super simple.

How much are you selling? What were your sales in the first quarter? You can break that down by month. So what did you take in January versus [00:06:00] February versus March is so important as business owners to get really clear on the seasonality of our sales.

Because once we really understand the season and the rhythm of our business, it makes it much easier for us to manage when sales fluctuate or we have quiet times. Things that we otherwise might not be expecting.

So make sure that you know what your sales were quite simply for the last quarter in January and February and March. One of the traps that people fall into is that because all of this information is available in your Shopify dashboard or whatever it may be. Or your Etsy dashboard or in your point of sale system. People tend to think, “oh, well I know it because I’ve got it at my fingertips.”

But the truth is a lot of the time people don’t really look at it in much detail or they don’t really absorb it. So quite often I’ll be talking to people who’ve got access to this information and I’ll say, “what were your sales last month?” And they will have to go look it up, or they won’t have it very much top of mind.

So you want to know what you took by month. You [00:07:00] want to know how that broke down by your sales channels. So if you’re selling in store online or on Etsy, versus your wholesale, versus your Shopify versus whatever else it might be. Know how those broke down. Know how they’re doing against the year.

Preferably, it’s just an idea. Which way are they trending? And also just know what they were doing compared to whatever goal you had. So did you have a goal for the first quarter? How’s it doing? How’s it going? You also want to know within that what is selling? So what products are driving these sales? It’s always really important to know that.

How often you should review your profit & margins

Catherine Erdly: Then your gross profit and your margins. This is something that if you’re doing a quarterly review, it’s a good opportunity to do this every quarter. If you’re somebody who’s got hundreds and hundreds of different products, this is gonna feel like a really impossible task.

But if you’ve got a small product range, you absolutely should be looking at your margins once a quarter. The best thing to do is get yourself a margin calculator spreadsheet set up.

So that you are able to input all of your costs. You know what the margin is on your product. And then as [00:08:00] things change, as some of the product of the cost of that particular component goes up, you can adjust your margin spreadsheet so that you are not in this situation where you’re constantly having to recalculate everything from zero.

So if you’ve got the book Tame Your Tiger, then within the time your Tiger Toolkit, there is a margin calculator. If you’re a member of the Resilient Retail Club, there’s a margin calculator inside there as well. But you want to just check this at the very, very least.

If you’re somebody who’s got hundreds of products and you just think I just don’t have time every quarter to check your margins, just double check that when you’re placing orders for things, that is the best time for you to check your margins.

What price are you being quoted? How does that compare to the price that you’re currently selling at? Have you let some things slip where maybe the price has been increasing, the cost price has been increasing, but you haven’t increased your retail price?

These are all really important things for you to check, and really good for you to do this exercise at least once a quarter.

Why does this matter? Well, it’s easy to sleepwalk into a situation where your profit margins are shrinking, [00:09:00] especially with costs rising. We’ve been in a rising cost situation for a couple of years now, and so it’s not unheard of for every time you place an order for something, the cost price to be different of to increased, and it is definitely something that you need to go over and you need to keep an eye on so that you’re not getting blindsided by it.

So making sure that you’ve got an idea of what your margin is, what you are currently placing at is really important. Also, if you can get to it, and it depends on where you’re getting your data from or how easy it is. Ideally, you’d like to know what is your actual out margin.

So your out margin is the real final sales margin. So for example, if you sell everything at 20% off or 10% off because you’ve got a welcome coupon code. And so in fact you think you’re selling something for 45 pounds, but you’re not really, you’re always selling it at 10% off. It’s really important to calculate what your actual out margin is at the end of the quarter.

So depending on your accountancy software, the way that you work with your accountant, your bookkeeper. You may be able to get this [00:10:00] information by looking at your net profit margin where you’ve looked at your cost of goods sold versus your sales, but you just need to double check that some can sometimes be inaccurate if, for example, you’ve bought stock at a certain point and it’s reflected your purchase.

But not the actual cost of goods sold of your sold goods. So if you can get your out margin, it isn’t the easiest number to get. But if you can, it’s really helpful to check that as well. The reason for checking that is because that way you can really understand what your actually, what your actual profit margin is, and it’s a good one to check.

If you can’t check your out margin, at least just double check what your discount amount is. So, for example, in Shopify, you can see how much you’ve effectively been giving away in discounts and just double check it’s not creeping up too much because that can have a big impact on your bottom line.

As well as looking at your sales and your margin. I definitely recommend you look at your stock. So in an ideal world, you will have gone through and created yourself a stock plan so you know what your stock is meant to be, your ideal stock.  

If you don’t know how much stock you’ve got, then [00:11:00] definitely recommend taking the time to do a stock take and work out how much stock you’ve got ’cause it’s a big indicator on how much cash is tied up in your business.

But if you’ve got a stock plan, then it’s really good idea to keep it updated on a monthly basis. But once a quarter, maybe go through, have a look. Do you think you’ve got the right number in there for your ideal stock? What do you think?

Do you think you should maybe need a bit more stock than you’ve currently got in your plan, but maybe it feels a bit tight? Or maybe you’re feeling like you could even bring down your ideal stock a bit more to try and reduce the amount of stock you’re holding overall.

In terms of your sales plan and your stock plan, it will have a sales plan attached to it because that’s how you calculate the right amount of stock for you is to have a sales plan as well. If you’ve been overperforming or underperforming your plan, you want to adjust that as well so that you make sure that the future months, you’re not planning sales that are way outta whack with how you’re performing right now.

Which brings me back to sales. So once you’re looking at your sales, you want to know how am I doing? How’s it performing compared to my plan compared to last year? But you [00:12:00] also really wanna try and understand why. Why is it performing up or down? Are there, for example, any shifts in your average order value or your conversion rate?

Those are good indicators. Try and understand what’s happening and why. You know, when sales are really good, it’s easy to kind of get caught up in that and say, this is fantastic. I love it. Sales are up, but you wanna know why. Is it because you’re getting more traffic from a certain channel?

Is it that people are spending more? Is it that you’ve had certain products that have worked really well? Whatever the position is, whatever your numbers say, whether that’s positive or negative, you always wanna take the time to really dig in and understand why that has happened. Because that’s how you learn, that’s how you grow, that’s how you repeat those positive results.

So something else to look at on a quarterly basis is just going over your cash flow. So if you’ve got a cash flow planner. If you haven’t, and I highly recommend getting yourself one, because it really helps you, get to grips with what’s going on in your business. [00:13:00] And really understand, are there any crunch points coming up?

And also just helps you check any decisions you might have, whether that’s a new hire or a big order or something like that.

Then going over your cash flow is really important on a quarterly basis. If you are an e-commerce business in particular, I would be suggesting very much that if you are spending money on ads that you’re looking at things like your ROAS, your return on ad spend. Your CAC, your cost of acquisition, your customer lifetime value. Again, not the easiest thing to get your hands on.

Sometimes it depends on the platform that you’re using. But if you can look at your customer lifetime value, basically what you want to do is make sure that you are getting a return on your ad spend. That your ads are not costing you more than you’re actually generating in profit, and that your cost of acquisition per customer is not creeping up too much.

So these are all some really great numbers for you to look at. So sales. But more importantly, what’s driving it? Profit margins, [00:14:00] stock, cash flow, and then some of your metrics around your cost of acquisition, your ROAS.

Also as well, things like, as I mentioned earlier, your average order value is a really important number to look at on an ongoing basis because you want to always be looking to try and push that, move that forward.

You don’t want to sleepwalk again into people purchasing things that are lower value and that causes you problems in the long run. If your average order value drops and you also want to look at things like your conversion rate. If you’re online, that’s much easier to get to. If you’re in person, I do recommend doing an exercise where you try counting a number of people coming in versus your transactions. It can be super useful just to really understand how things are going and how your sales numbers are trending.

How to use Q2 as a reset button on your business

Catherine Erdly: So how do we use Q2 as a bit of a reset button? Again, as I mentioned, this is a really important point in the year.

You’ve put your plans into place, you have set [00:15:00] your focuses for the year, you’ve started to see some results. So what I would do is I would suggest that you really delve into what has worked, what didn’t work, and then where are the gaps. So on a quarterly basis, it’s great to sit down and really have a look at all of the things that worked well.

I like to split it into what worked well and added value. So what were things? It could be products that worked well. It could be social media marketing that worked well. It could be your emails have picked up. It could be the ads worked well. It could be you had team member really slotted into place.

It could be that you, as the founder of actually being able to pay your VAT bill without having to put money into the business, for example. Whatever it might be. Make sure that you really capture what has been working well, particularly again as going back to any trading activities. So products, marketing, promotions, like what’s worked really well for you.

And so you can make notes and then just ask yourself, do I need to do more of this in Q2? What have I currently [00:16:00] got planned for Q2? Do I want to do more of it?

Then you go back to what didn’t work well or could have been better. It’s really important to capture that as well. It could be products that you launched that didn’t get a reaction.

It could be social media channels that used to work really well for you that just for some reason haven’t been performing. It could be a team member that was causing issues. Whether it’s that you need to look to get more support, you didn’t have enough hours with them or whether they have a performance issue.

It could be questions about some of the partners you have in the business. Your suppliers, your couriers, fulfillment center if you use one. All of those sorts of things. So just thinking about what, whereabouts could I make some adjustments. And using that list of things that maybe didn’t work so well to identify the gaps.

So again, those gaps can be positive. This worked really well, I want to do more of it. Or it could be this didn’t work, so actually I really need to maybe not do that next time. Let’s say, for example, you had a new product launch, you launched a new range of pink products.

Let’s say you’re a [00:17:00] clothing brand and you had a whole load of pink products that came in in the early part of the year and it just didn’t really get a reaction. And you weren’t really sure, or maybe it was to do, you would still wanna ask yourself questions like, why don’t, do I think it didn’t work?

Is it, was it too early? Is it actually gonna sell better now? The weather’s got warmer. Is it something that just was the wrong price point? Is it something that just wasn’t the right style? So if you then think about that, you would then look at your future launches that you’ve got coming up and say, right.

Well, okay. I think maybe it was the price point more than anything. Well, actually, I’ve got another launch coming in, which is also a similar price point, and now, I’m feeling a bit nervous. Okay, I’m gonna make an adjustment.

I’m gonna see if it’s possible to reduce that order or push it back, or otherwise make some adjustments.

Taking action on your numbers report

Catherine Erdly: So really it’s about looking at what your plan was for that quarter, looking at what worked well, looking at what didn’t work well, using that to identify the gaps and using that to make adjustments moving forward.

[00:18:00] So one of my mantras is information for action. There’s no point you spending hours and hours combing over the stats and making yourself a beautiful report all about your first quarter.

If it’s not actually gonna be anything you’re gonna do anything with, you’re gonna be like, oh, okay. Yes, my average transaction value was 27 pounds, 52 pence, right? You know, that in itself is not a useful piece of information. But if you say, my average transaction value was 27 pounds, 52, that’s actually up 10% from last year.

And this quarter I tried doing some add-on products. Okay, that’s really interesting. That seems to be having a positive effect. Do I have any more add-on products planned for Q2? No, I don’t. Okay, let me think about adding some in. I need to find some, source them, bring them in. So that’s the kind of thing that I think is really powerful for a Q2. Sort of Q1 reflection, Q2 planning, is you go over your broad plans for Q2 and you sense check them in the light of how Q1 [00:19:00] went.

So you would maybe adjust your stock buys, maybe your marketing plans, the things that worked really, really well that you haven’t repeated. So let’s say you did a collaboration in January and it was brilliant. You had such a good reaction to it. People really loved it. People responded to it. It brought you lots of new followers.

But you don’t actually have another collaboration planned in for Q2. That is your signal to say, “Hmm, do you know what? This didn’t work really well. This worked really well in the first quarter. I want to do more of this in the second quarter.” Right? Who can I reach out to?

There’s also looking at the events that you had. So for example, we’ve had Valentine’s Day. We’ve had, well, Mother’s Day is shortly coming up, or you will have had Mother’s Day by the time this comes out. So how did those go? What worked really well? And then what do you want to bring into Easter if that’s something that’s important for your business?

Father’s Day, for example, what learnings would you have? Could you apply from those seasonal events to the next seasonal events that are coming? [00:20:00] You might wanna think about your pricing strategy, people responding to the products at the price points that you expected. Do you need to make any changes to your product selection?

Is there anything that you can do there? Like what is working well? What do you wanna do more of and what isn’t working and you wanna do less of? And you wanna go over your plans for Q2? It’s not too late to hit your 2025 goals whatsoever. 2025 is really just getting going, but it’s great opportunity to make that course correction.

And the key thing is not to bury your head in the sand and just think, oh, actually everything’s great ’cause I did better than I expected. Or on the flip side, oh, everything things didn’t quite work the way I wanted them to in the first quarter. So I’m going to just kind of bury my head in the sand.

You want to avoid burying your head in the sand as much as possible and really try and gauge with what you are. You are seeing because whether it’s positive performance or negative performance, there’s definitely gonna be things that you can pull out and adjust and make better going forward. So make sure that you take that opportunity to do [00:21:00] that.

What to do if numbers feeling overwhelming

Catherine Erdly: So what do you do if you feel overwhelmed? So you might listened to this podcast and thought, ” okay, this is great, but I have so much going on, I just don’t have the time to sit down and go over the first quarter. I just know I’m not gonna get to it and I’m just heading straight into the second quarter.”

That’s absolutely fine. You are not alone. Lots of small businesses find it, not only overwhelming to think about the number side of things, but find it difficult to just carve out the time. So I’d say that there is support out there.

We have our Stock Doctor service, which is designed for this, which is really there to help you get a handle on your numbers with somebody who’s a trained professional coming in and looking at those for you. You can also talk to your accountant. Some accountants will offer a service where they will actually give you a bit of a rundown of your numbers on a monthly basis.  

But at the very, very least, just have a look at your sales. Even find one number to focus on, just how did you do in the second quarter, and just set yourself a timer. Sit down, set a timer on your phone for 20 minutes, 15 minutes even. Sit down, look at what you took in [00:22:00] terms of sales in the first quarter compared to last year.

If you can get it, your plan, and then just think about the top three things that you do differently. Or the top three things you wanna make sure you absolutely do hit for the second quarter. And that can be enough. It’s better to do that than to completely disengage from the numbers altogether because you find it really overwhelming.

Set yourself a timer. Set yourself a goal. And to just go through what happened in the first quarter and note down some thoughts for the second quarter.

So there you go, I would love to encourage you to block some time out this week to look at your Q1 numbers. If you’ve got any questions, then do drop me a message on Instagram @resilientretailclub.

I’d love to hear your questions and hear how you found that. Set yourself a goal or look at your Q2 goals and decide are they realistic or do you want to make any adjustments?

And are there any major things that you’d like to adjust in terms of your plans for your marketing, and so on and so forth. Don’t worry, you’ve got this.

Everybody finds it overwhelming, but the more that you take the time to sit down and look at things like this, go through a quarterly plan like this, then the more easy it will [00:23:00] feel in the long run.

Do come say hi on Instagram @resilientretailclub. Don’t forget to like, follow, or subscribe the podcast wherever you listen to your podcast and you’ll be the first to know about each new episode. Until next week, see you then.