Own Your Financial Fishing Gear
Not for profit doesn't mean unprofitable
This idea of a profit motive sometimes clashes with the culture of a not-for-profit. Those dedicated to serving a challenged community understandably focus on the mission first. Still, things run on money.
Grants and government programs serve an important role in sustaining most not-for-profits. Their value can’t be underestimated. Often the strings attached add a layer of complexity and staff expense. They tend to come and go as the focus of the foundation or government entity shifts.
When a cause owns and controls much or all of the means of generating revenue it is better able to chart its own course.
It isn’t so much “teach a man to fish” It’s own your fishing gear.
It’s a beautiful thing that so many thrift and second-hand stores are dedicated to supporting a very specific cause. A benefit that is not often mentioned is that profits, yes that word, profits generated don’t include the strings that go with grants. It’s totally unrestricted money.
Dividends paid to shareholders versus money to fund a cause.
A professionally run thrift operation can generate money like a blue chip stock. Month in and month out, year in, year out. What’s not to love? Professional is the keyword.
Some thrift operations are designed mostly to provide work experience or opportunities for those that might not otherwise find either. That’s another flavor that sometimes finds a different way to pay the bills.
For everyone else, successful stores tend to be run by leaders using traditional retail and business metrics. This can sometimes be the core of the disconnect between mission-driven staff and business-minded merchants.
What holds some thrift operations back is where they fit in the organization's hierarchy. Not so much the official org chart, but how they are prioritized. It’s easy for short-term mission focus to take precedence over investing in and building long-term sustainable income streams.
A great example is grant writers. Not-for-profits often pay top dollar and actively compete for their services. The best of them are true rainmakers. Grant writing services charge amazing amounts of money. Professional retail staff and operations can do the same with fewer strings attached.
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A colleague of mine recently shared that he will be stepping down. His board of directors refuses to invest in quality staff or anything but bare necessities to keep buildings open. He is an experienced retail merchant leader running a profitable operation. It is regularly stripped of every single dollar it earns. He feels like Cinderella without a fairy godmother.
I fear he will return to traditional for-profit business where if you are making money you get the resources to do more.
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Being able to take random donated stuff and turn it into an ever-changing, appealing retail thrift store is a high-level skill.
Things that hold back a retail operation:
Underpaid retail staff that can’t find a better job.
Cash registers that KMart would have used in the 1970s.
Limited if any real business metrics.
Tired, worn-out fixtures and facilities.
Poor locations that are hard to find.
Managers that have little actual retail management experience.
Little investment by boards of directors.
All of these issues can be addressed.
There is a reason Goodwill Industries is a very successful 6 Billion dollar-a-year retail operation. The vast majority are run like a business.
Top three things that will move the needle:
Staff. Paying staff a competitive wage for the market is, to me, one of the most basic requirements for long-term stability.
Any business below the prevailing wage for the industry locks itself out of top talent. Employees tend to leave for the smallest increase in pay. The management team spends its time interviewing, hiring, and training. Just to do it all over again, and again. At best, management is playing defense.
Real money is in a trained capable staff managed by professionals that know what customers want.
Data. The whole world runs on data. There is a reason chains invest millions of dollars on everything from high-tech cash registers to data parsing software. Knowledge is power.
Invest. Invest in the business side of your cause so you can do more with your cause. For retail; people, facilities, systems, and processes are all tools that help professional staff build the business.
If you have a revenue-producing business like a thrift operation, feed it, provide for it, grow it. If you do, it will grow revenues that will feed and provide for your cause. It’s the circularity of business.
Maintain and upgrade your fishing gear regularly.
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How an investment in technology and data pays off:
Years ago I worked for an independently owned grocery chain. The owner was an early adopter of scanning registers and the information it provided. As primitive as that system was compared to today’s, we learned we didn’t know as much about our inventory as we thought.
Turns out intuition and memory aren’t that good when managing 30,000 plus SKUs.
After we got everything entered into the system and worked bugs out we let it run for three months without peeking too much. Then we ran a zero to three-item movement report. It was everything that had sold three or fewer of the same SKU for 90 days. It went on for pages and pages, the now vintage tractor continuous feed type.
We killed entire sub-categories, marked down, and eliminated hundreds of items. We gained tons of space on the shelves.
What to do with all that space?
Next, we ran out of or low-stock reports. We had been extremely diligent in keeping accurate inventory counts so we knew the reports were good. We embraced garbage in garbage out from day one.
In traditional retail, there is a correlation between an item’s velocity (how fast it sells) and the amount of space dedicated to it. In a perfect world, there is enough space for each item to make it a little beyond the next replenishment cycle. (never works that perfectly but you get the idea)
We bumped up the space allotted to items regularly out of stock or low on stock. Essentially better matching velocity, or customer demand, to dedicated space.
Sales went up by 20% plus in a mature well run store. Turns went up, goods were fresher. Based on the profit-sharing payments at the end of the year, it was a huge win.
I have had similar experiences in thrift retail. Knowing what sells, how fast it sells, and what a fair price is based on the customer is literal gold.
Get the best fishing gear you can afford and upgrade as you are able. You will catch more, bigger and better fish over time.
Thanks for reading!