The Income Statement
Your income statement details your revenues or income—mostly your sales—and your expenses. The difference between the total revenues and total expenses is your profit or your loss.
So your income statement is essentially your bottomline report card. You already know that, most likely. But it’s also a gold mine of information about your business. Sure, it’s good to know that at the end of the month, your revenues exceeded your expenses, but other valuable nuggets are buried in this report.
Merchandising and Sales Focus
For example, the income statement can provide insight into what you are selling. The smartest dealers divide their revenues into categories that correspond to inventory departments and service areas, like flat screen panels, audio gear, speakers, controls, accessories, extended warranties, delivery and installation. Categorizing sales by department gives you the ability to track profitability in each area.
We all know that within any category, certain items are more profitable than others. We guide our associates to them. Making a distinction between more and less profitable categories can improve your bottom line without the need for closing more sales or attracting more floor traffic.
After you’ve sorted your sales revenues, you can compare your sales in major categories to other dealers who reported to the NARDA/PARA/CEA Cost of Doing Business Report. For instance, you can see how close you are to the most profitable dealers, who reported that audio accounted for 31.4 percent of their total sales (including service and installation) and accessories for 8.7 percent. The average for all dealers reporting in those categories was 28.3 percent in audio sales and 5.9 percent on accessories.
Those dealers with higher-than-average sales of higher-profit categories netted 9.6 percent in operating profit, while the average company made one-half of one percent. That’s some difference! The most profitable dealers work harder than others to attach an extra pair of speakers, sell higher-quality speaker wire or ensure that each customer has all the accessories they need to complete the home theater experience.