Managing Inventory, Markdowns & Cash Flow for Boutiques

We'll get you broken. You'll be an old pro with this by the end. Well, I think we're live. Let me just double check our connection here, guys, if you guys are watching. Hey, Boutique Hub members, if you're watching here in our group, make sure you say hi below. Let us know if you can see us. I know we've got a couple comments here from before the video went live. So you see us live, let us know. Just wait a minute. As people kind of start to join us here, a couple of the questions that I see from you guys who were commenting before we went live, you were asking, how do you get the reminder? Like, we had the reminder set up in the group if you didn't catch our video last week? We're using an app called BeLive. It's BeLive TV, and you can check that out. And it looks like there's about 12 of you. I see the numbers growing. So can you guys hear us? Okay, Doug and Scott, you want to say hi super quick, and we'll test our sound.

Hi, everybody. Welcome. I love the questions already. The people saying they're ready to be confused. I hope that's not the case.

I hope that's about the video and not us.

Yeah, exactly.

Let the confusion begin. It's on, man. Perfect. Well, so for you guys that are just joining, I see lots of you hopping on. You can hear us now. Perfect. So welcome. We are in week two. I'm so excited that we're doing this. Oh, we got one person asking about sound. Hopefully, if our boutique events are on here, Cassidy and Beth and Jesse, let us know if you can hear us. Okay. Otherwise, if you are having trouble, if it's an individual issue with your browser, we will download this video and we're going to upload it to some other platforms later. So you should be able to hear the sound there. So if you miss it here, you'll catch it again. So just a quick update. This is Boutique Chat. We're in week number two of Boutique Chat, and we're so excited about this little interview that we have going on and the guests that we get to bring you every week. So our mission here is to bring in experts on all subjects in the boutique fashion industry throughout the month to help them share their knowledge with you and even share exclusive offers with you, if that's applicable. And just to help you grow your business and make connections in the industry. So today, I'm excited about our two guests. I know you guys have heard me talk about them a little bit over the last month. So last month we were at the Boutique Summit. Many of you were there in Dallas in June. And the week after the Boutique Summit, I flew to Tucson to join these guys and to meet them in person with their company, Management One. So Doug is really the reason I got connected with Management One, because he is a consultant with one of our members here at the Hub. And Doug introduced me to Scott, who then invited me to Tucson and let the story begin from there. Right, guys?

Yep.

Yes.

Fell from there.

Everything fell into place from there. And we were so excited because once we started to put the dots together, we realized that the things that we talk about and the things that we coach about at the Hub are such a perfect pairing to what you guys talk about and coach about at Management One. So for those of you all who don't know Management One, they are inventory planning experts, and they can sit down and help you understand every aspect of your inventory and your cash flow and help you make a plan that will help you be a better buyer and manage your finances in a responsible way. Now, there's a lot that goes into that as well as a lot that goes into planning, your marketing and your traffic. But one has to go with the other, as we all know. So the way Doug and I met this client that hopefully she'll hop on and say, hi, Doug was her coach, and I was also coaching her in Boutique bootcamp at the time. And so she connected us as her two coaches and the rest is history.

Thank you, Natalie.

Thank you, Natalie. So I want you guys just to say, hey, talk about your background, talk a little bit about your history with Management One, and then we can get into talking about inventory and what these ladies need to know to help grow and manage their business.

You want to go first, Scott?

Sure, sure. Well, my background, many, many, many years ago. It's funny because Doug and I, before we got on this call, were comparing notes on a brand we used to supply over 30 years ago. But I come out as a young teenager to Canada searching for snow and adventure and ended up in retail, believe it or not. So I spent about 16 years running retail stores across Western Canada in the outdoor and F space, and then moved on to kind of fell in love with the technology side and started looking after an organization that supplied point of sale systems. Did that for about 10 years. The interesting thing about that is that in supplying these point of sale systems, I could never make the true connection between making a retailer really profitable and looking after them cash flow wise, as opposed to just giving them a Tool to play with. And I come across this Management One service, this merchandise planning, what was probably about five or six years ago and started to implement it through the retailers that I worked with and fell in love with that because I saw retailers thrive. I saw them really grow their cash, build their businesses, and that was it. And that's led me to where I am now, and I work directly with Management One and Doug and. And, you know, we look after many, many retailers around the world.

I love that. I think it's awesome that you were so interested in helping the boutique owner on a personal level. Not just giving them a tool and saying, run with it, but actually seeing them through and help this retailer succeed. Awesome.

Yeah, I think that really does make the difference, Ashley. It's that. It's a great advantage coaching, and it's really giving, you know, the retailers someone that they can. They can talk to and they can share with and they can be accountable to, to some extent, to really build their business.

Absolutely.

Yeah. My story is really similar to Scott's, only it's very different. I was actually a sales rep. I've been in the. On the wholesale side of the business for. Since, like, a long time ago. How about we just do that? And my wife and I still have. Yeah, right. A long time ago. My wife and I actually still have a repping organization here in the Midwest. But I used to work with hundreds of retailers as a sales rep. But the ones that always let me into their business to be a little bit more involved were the ones I got really excited about and help them take some ownership of the product. And I would walk. I wouldn't walk into a store where I said, if you got rid of 20% of your inventory, your sales would probably not go down. And so then all of a sudden, I found out about Management One, and I found that there's more to it than just 20%. There's a lot more statistical things that most retailers aren't using. So as soon as I found out about it, I found out a whole lot of retailers that I'd worked with use this company, and they'd never told me as the rep that they worked with this company. So they all said you'd be great at being a Management One affiliate. I went for training. Now my wife runs the repping agency, and I just have done management one for going on close to 10 years, and it's just been fantastic. I also love the art side of the business. Most people get into retail because they love the art part. They don't like the science part or they don't know the science part, which is what management one does. And then as a coach we help all the people that are creative how to make a make a better business plan to be able to move their business forward. Because you have to have the balance of the art and the science.

Absolutely. You have to be a true retail professional, not just liking the pretty things and wanting to buy them all the time. Right, right.

That works to a certain degree.

Yeah.

Usually gets you good your juices going. But if you want to stay in the long term, you got to understand all the other things. Just like the marketing part of it, Ashley, that you talk about. You can start doing Facebook, but when you are going to get serious, there are other things that you need to do to make that really work and grow.

Julie Coraccio, 34 yeah, absolutely. Well, let's jump into the confusing part, shall we? The thing that the meat and potatoes that those that are commenting below are asking about. Well, I just want to start with some kind of basic questions and for those of you watching, you can jump in with your questions too. And really the intent of our conversation today is both to give you guys actionable takeaways and tools that can help you understand where you're at right now and start making smarter choices in your business, but then to also set you up with some opportunities long term should you choose to take this to the next level. And if you want to visit with these guys about just kind of the opportunities that lay ahead if you want to coach in this area. So to get started, let's just talk about merchandise planning and what that actually means for a retailer.

Absolutely. I'll jump in, Doug, if you like and just say that One of the things that so fundamentally merchandise planning is understanding where to put the product at what quantity and what time and being able to do that very accurately and with that it's fundamentally a cash flow management process. Understanding where, when and how to put merchandise in your store directly results in the ability to drive cash into your business on a frequent basis because you're having the optimum amount. So ultimately why a retailer uses planning or uses merchandise planning is to control and drive cash flow. The result of what you can do with planning is you can actually increase sales with reduced inventory because when you know where to put product, what specific category to put that product in, you can actually your customer vote, your customer votes with where and what they buy. And being able to drive into those specific categories means that you can increase the sales but minimize your effect on the Inventory itself. So that's really where the cash flow comes from. And the big part of it as well is the reduction in markdowns. Markdowns, they're a great tool to drive and inspire a business and customers, but they're also a very significant deterrent to where you can be for cash. So if you've got the right volume, you're able to really kind of minimize and affect those markdowns correctly. And then the big part of this whole process as well is it creates and orientates your store to be fresh. When people walk into a retail store, they want to be wowed every time they walk in. Freshness is a key factor to differentiating ourselves from what they can see on the web or what they get from a department store is that they can come in and they go, oh, I great. I'm looking at something new. And that's what planning really, really builds on and strives to do as well.

And so, Ashley, the way I like to explain it is you have a lot of most retailers think about their business from their vendor structure. They don't think about it from their classification structure. You have a whole lot of different little businesses in your store.

You have a tops business, you have.

A dress business, you have a pant business. And most retailers, whether they have a POS system or they don't have a POS system, don't typically have a really valid classification structure. So they're not thinking about their business in all these little ways that can affect the business. What I've seen typically is they have a clothing class and then they have a class, 1200 classes for all their accessories. So they're looking at eyeglasses, but they're not looking at tops. And the POS providers, quite frankly, are terrible at helping new people get started with the proper classification structure. And so to think about this, at the most elementary level, it's really looking at how are you thinking about your business if you're not thinking about it properly from a classification structure, which is what we plan, we plan your classes and they roll up to your overall business. So we're seeing how you're doing. And tops and dresses and bottoms. Are you over inventoried? Are you under inventoried? Are you taking too high a markdown? Do you have enough to drive sales? Where's your sales coming from? And that's a lot of what the merchandise planning does. It helps you get a better idea of what you're doing really well with and what you're not doing really well with.

Absolutely. So for those of you watching? If you have questions, if you're watching live and you have questions on this so far, make sure you ask below because no question is a stupid question in my book in this topic, because this is a huge topic with lots of detail and we could go down a lot of rabbit holes here. But essentially, I love how you both have laid this out so far. And to even take it a step further, let's talk about tops, for example. So a boutique owner may just be thinking about their class structure in terms of tops as a whole, but you and I both know that tops are fashion tops, dusters and kimonos, graphic tees. And then also if you carry specialty brands, you may also break out a class for a brand to see how it's performing as well. Right.

If you take away, you know, you talk about the meat and potatoes of this session today, actually, I think you've really pegged it as Doug has as well. If you take away nothing more from this session, then. Sales system to break that out, You don't. Can be a monumental change.

I think some of Scott's video is cutting out there. Doug, do you want to jump in on that?

Yeah, yeah, I think that'd be helpful. So the reality is, if you're a 200, so what you want to do is think about. So we can. We all have. I'm sure there's people here that are doing $150,000 a year, and there might be somebody on here that's doing a.

Couple million dollars a year. Right.

You want to break your classification structure in a way that makes sense for your overall business. So you might need just one tops class separate from your clothing classes, if that where you start. But once you start growing that business, like Ashley said, you need to start thinking about how you need to split out those classes. So I have clients that have one top class. I have clients that have two top classes, three top classes. I have clients that have five top classes. And it's all proportional to how much overall business that they're doing. You want to think about somewhere between 25 and $50,000 worth of annual business to be looking at making that a class or not. You don't need to plan things like eyeglasses that you're only selling $1,200 a year. You want to roll all that into an accessories class, but you want to break out the things that are doing the most volume. So the whole idea is so you can get a better picture of where your business is coming from so you can take action. Because the Numbers are only helpful if you can take action from them, which is why retailers hate their P and L statement from their accountant. Because they don't know what to do with it.

Yes, exactly. So I loved when we were sitting in Tucson and, Doug, you and I sat down together and we went and thank you, Natalie, by the way, for being so generous and letting me look at your plan with Doug. And not that I'm going to share numbers, but it was so helpful to see it in action and to understand when you have those numbers and you understand by class now, what do you do with it? So, Doug, can you help walk through when you have that data by class, what does the merchandise plan that you create, how do you make those numbers speak, and what do you do with it in terms of both forecasting and then understanding where you need to place your markdowns?

Yep. And so every. Every plan that's generated by management one, and they're all individually customized for each one of our individual retailers, there's not a standard, you know, program that gets thrown out, and you got to figure out how to make it work. You're with an affiliate that's talking through and getting you started in a way that makes sense for your business. So with every plan, there's a sales forecast, there's a markdown forecast, there's a receiving at cost. In retail, you can see freshness, how fresh your inventory is. So there's all this statistical stuff. So you can say, hey, how well did I do against the sales forecast? Did I beat it by 25%? And if I beat it by 25%, how are my markdowns in relation to that? Where's my inventory level and what's my receiving going to be like coming the rest of this month and next month? And that's the kind of stuff you look at class by class and go, wow, I need more tops. I'm killing it. And the second part of that is I'm not really doing very well with bottoms. Even though I love jeans and I keep buying them, I've got more inventory than I could sell in a year. Why do I keep buying this stuff? I love it. So you're with an affiliate. Your affiliate says, go out and buy yourself all the jeans you want, but don't buy any more for your store, because every buyer is really good at something, and they're not really that good at something. So it helps identify the strength and weaknesses of a buyer as well, and where their overall business is going. And that's what the plan shows you. It's the good, the bad, and the ugly. My report card this month was an A in this class and I got a B in this class and these other classes were C. Thank God. My A class was where most of my volume is coming from. So that's keeping me going. And if you, if you can identify the top 20% of your business and the bottom 20% of your business and take action on that, that's how you move your business forward.

Absolutely.

Most people can't see that very clearly from the reports that are generated on a point of sale system.

Yeah, I don't know if I'm actually back with you guys now, but just adding to, to what Doug said there. One of the things that we often talk about, the accuracy of a sales forecast is incredibly key. And to be able to have the confidence that you hear from Doug when you sit down and go through a plan comes fundamentally from the fact that we've built out an incredible ability to know what your store will sell on a month to month basis by these classifications. And you'll hear about open to buy planning. You'll hear about that a lot. And open to buy is a fundamental mathematical process. You just basically how much you need versus what you bring in and then ultimately what you need to go and buy. Well, behind that, though, is the accuracy of what you're forecasting. Where do you really get that number from? Well, the number that we get comes from trending all over the world, fundamentally North America, geographically, based on trend and based on the vote of the customer over a significant length of time time, we're able to build out a process that has a forecast with a 94% accuracy rate. Imagine sitting down with your coach and being able to have that confidence that you're going to sell this much product next month in this class. And then put that together with what Doug's talking about here. And being able to strategize markdowns. Imagine knowing the number of dollars that you need to take in markdowns instead of going, whoa, man, I'm out of cash right now. I can't pay my staff at the moment. I better grab a sale and put a sign up in the window. Don't do that. With this program, you calculate and strategize with real numbers and real accuracy.

Yeah. I just did a live video this morning, you guys, on our Boutique Hub Business Facebook page, and I talked about seven financial tips that boutique owners must know to be successful. And one of them was, please stop doing blanket sales across all categories.

Thumbs up.

There's no way you can be successful just throwing a blanket markdown on everything. And think about the margin that you're losing and the opportunity you're losing in so many different areas. So can you talk about that thought process? It's exactly the same thing you're mentioning, Scott, with what's in the plan that you get. You're strategizing your markdowns to generate cash in specific classes of your business. And while you get a markdown in one area, you're now upselling and cross selling strategically in other areas when you get people into your space.

Absolutely, absolutely. Ashley, you know, you think about this and we keep going back to Doug's point of classifications. These are all independent little stores inside your store. And if you are, if you're blanketing across that group, then you're hurting potentially great opportunities to blanket them all in one. So to be able to really strategize and build a strategy for each class, first and foremost, you're supporting the needs and the wants of your customer. You know, like you're looking to drive in and get more fresh product, not mark down product that they're desperately in need of. And then the areas where they're telling you guys, it's not really working for us, you're able to take those dollars and put them in a better place with that markdown strategy. So it's critical to see your business in these modules, in these little independent stores so you can build out a strategy that fundamentally looks after your customer.

And Ashley, the reality is you do an amazing job helping everybody with the marketing, but your number one marketing tool is your inventory. You can get all the people through your store that you want, and if you don't have the stuff that they want to buy, that's not going to help you. So when you do a blanket sale to get people in the store, they cherry pick all your best stuff and you're still left with the stuff. And so the merchandise plan actually is a great marketing tool because it says we're over in dresses. We didn't have as great a buy this month as we wanted to in dresses. We need to promote dresses. We don't need to promote all these other things that are doing really well. Or you know, we've got a tent sale coming up. We know how much business we're going to do. We're actually going to buy some off price goods and not just use that as an opportunity to take our hits. We're going to actually make some money on a sale. So there are lots and so many Opportunities when you get to see your business from a different perspective.

Yeah, I hope that you guys that are watching, I hope you feel like your mind floating right now because it should be. These are so many great aha moments. I mean, exactly what you said about when you run a sale like that, they're just cherry picking your store and you're back where you started from in the first place. And then to your point about going in and you do the cherry picking when you go to buy off price merchandise, whether it's at the off price show in Vegas or wherever, then you get something at such greater margin when you do a 30% off markdown on that item, you're still maintaining a higher margin like you would mark another item at full price. So man, that's where becoming a great hunter and a great strategist financially comes into play.

I had a really quick little story. My wife has a client and they had a big tent sale and she went there, she bought stuff that we rep. She bought it cheaper at this client's tent sale than she could have wholesale from, from our company. But I just met with them and they were like, yeah, we're pretty productive on these tent sales. And I said, have you ever thought about doing a tent sale where you actually bought some things? And they were like, why would you do that? You mean you can really do that? So I mean, there's so many opportunities. Almost every one of my clients now does a warehouse sale or a tent sale and some of them used to do it to clean up old goods. Now we have a budget that we've developed for them to go buy. So it becomes a profit center. It's not a markdown taking. We're taking it in the shorts, but we need the cash. It becomes a marketing tool to drive business, which is pretty amazing when you get to that point.

Absolutely. There's a couple questions on this topic and I think I can directly. So Tracy is asking about marking down summer items as a whole when moving into fall. And I think it's the same kind of thing when you're marking down those classes items that have been on hand for a while. And I think Tracy, to kind of piggyback on your question, a lot of people are doing fill the bag sales similar to a tent sale. Same thing where you're. You're getting specific about what you're selling, but then you're upselling and cross selling higher priced items. So if you guys want to that at all or go any further into that. Otherwise if you guys can see Shelley's question down below. She's also asking, when you're starting to build your classes, do you start from scratch? Like, do you go back to what you've already developed or do you just start working with what you've already got in your system?

That's a great point. It's a great question. You know, it is sometimes challenging with the POS systems that you work with and moving class structure around. I think fundamentally you look at what your customers are. If you're starting from scratch, you really kind of need to visualize what are your customers coming in for, like what are they, what's driving their desire to walk in the store. And then build out your classification structure accordingly. If you have started one way and you realize that you've got to take a different track, don't despair. Use the intelligence and the knowledge you've built out of your descriptions out of the product and start to find patterns there. To break it out by many, many point of sale systems will support you in changing your departments and then correcting your history. You just need to ask that company, like, what do I need to do? It's kind of an intimidating area because it's the backbone of your organization. The department structure is the backbone of your point of sale system. But there's help there in most of the POS systems that you work with for sure.

So don't let me forget to talk about markdowns too, Ashley. But what I wanted to say is the other thing about thinking about what the customer is looking for. I always think it's really important to think about what the buyer is thinking when they're buying a category. I have clients that we have different top classes because when they go to California, when they go to la, they're thinking differently about tops than they're going to their vendors that are their premium vendors. So there's a different mindset there. And it's important to think about how your customer is voting on your merchandise, but it's also important to think about the point of view for the buyer. If your classification doesn't gel well with the buyer. If it's like, you know, it's like I'm really having a hard time buying casual tops because I'm not a casual top person, then you need to maybe change that to another way so that it, it makes more sense. So when I'm buying this vendor, I'm thinking very clearly about these numbers. When I'm doing this over here, I'm also thinking clearly. So it makes, it makes sense from a buying perspective. But so the other thing I wanted to talk about with markdowns is markdowns are only needed on products that need help to get out your door. A markdown is saying, hey, this product is not doing as well at regular price as I was hoping it would do. So the sooner you identify that product as a problem, the least expensive your markdown is going to be. And that is so strategic for the buyer to understand. Sometimes in high traffic time, you might need to take a markdown in three weeks. Other times, you don't need to take a markdown for 10 or 12 weeks. But the stuff that's been there longer than that, you might love it and you might still buy it. But guess what? Your customer doesn't. You need to take that markdown sooner rather than later. The only reason you need a 10 sale should be to buy for it, not to close out stuff at 10 and 20 bucks, because that's not the way to run your business. If you saw that sooner and you took a markdown on that, you would have not needed to go down to 10 or 20 bucks to get that out your door.

We have a senior affiliate who's always full of wisdom and tidbits that we work with, and he always says, your inventory is not a fine wine and it's not gold. It does not improve with age.

Amen. So I think this goes back to some of you that were commenting or were saying that you were just starting. And I think if there's one place you need to start understanding the data in your business, as you're just starting and you're just getting into this merchandise planning idea and mindset, it's fundamentally, you have to understand your margin and how to get the most margin out of your product. That is the name of the game. And so to do markdowns, the name of the game is get the highest margin possible. Right. This is fundamental abc. So when you're, when you're thinking about how long your inventory has been on hand, let's talk about the process that you go through. If something's been there for a certain period of time and you've not sold, we'll say 50% of the pack of whatever it is that you've bought. Now we talk about restyling that item. If it's in your store, moving it around, you're going to restyle it on your model or put it on a different model for your website, and you're going to relaunch it to your customers online. So the whole art of being a boutique owner is Filling the needs of your customers. You're the teacher, you're the artist, and you love fashion. But chances are your customers, they're a little bit intimidated by fashion. So it's up to you to teach them and educate them on how to wear something. Right. So let's talk about that process. You get it, it doesn't sell. You restyle it, you re shoot it, you relaunch it, and then at a certain period to mark it down.

Yeah.

You know what? There's an interesting strategy as well in the markdown process, and Doug may speak to this one as well, that there is also, like we think about the logical process as you said, is we re merchandise first. We look for opportunity to revitalize the product. Then we move into a markdown strategy. We take our early markdowns, we move into our deeper markdowns. There's one markdown that we don't talk about a lot and that's using the staff incentive. Like there's a markdown for the staff before and this is in bricks and mortar specifically. But you know, there's an opportunity for you to incent your staff to sell product and give them a few dollars as opposed to take a markdown directly to the client as well. So a lot of people forget that that's a strategy in between that you can utilize with your markdowns as well.

So are you, when you say that, do you mean like giving your staff commission on all sales or certain pieces of your sales or tell me more.

It means quite often that you can again, knowing and understanding your strategy by class, you can start to incent your staff with a classification or a product grouping with an incentive outside of like we encourage all stores to be using commission structures. It's very, very important to have your staff motivated to be able to sell product. But at the same time, what about, you know, throwing a $20 bill around for someone that sells the most in this category on a particular day? Or what about raising the commission on a certain group of products so the first markdown actually goes to your staff before it goes to the customer.

I gotcha. I love that strategy. And we do some of our clients in Boutique eTamp, we talk about that, about the importance of having team meetings and then every week incentivizing your staff with the biggest fish or certain add ons or certain categories or the messiest dressing rooms, you name it. But there's lots of ways to do that. I love it.

That's awesome. Awesome.

I've got a couple more questions, but I see there's some below. Rachel's on and Rachel has a fashion truck from Colorado. And so she's asking how does this process work with someone that's online only or that is a fashion truck?

Great point. Go ahead, Doug.

Well, I was just going to make a little point and then let you talk. You know, your inventory is your greatest investment. It doesn't matter if you're online or you're a fashion truck or your brick and mortar, you're spending more on your inventory than anything else. So anything that can help you get a better handle on that is important. So I'll let you go into the nuts and bolts of that.

Scott. If you're stocking, if you have a requirement to predict and stock your inventory, it doesn't matter whether it's an online business or if you're a fashion truck or a bricks and mortar store, it's critical that you match the demand for your market. There's patterns through no matter whether you're in that truck or you're online. There's patterns by classification, there's patterns from your customer that you've got to make sure that you're ahead of the game with. So you know what it is. Fundamentally, planning is looking forward as opposed to looking in the rearview mirror. A point of sale system looks in the rearview mirror and says, this is how I did last year. And then you make some conclusions. What forecasting does and what really true inventory planning does. It says, this is where you will be. This is how we have to optimize your business and you push forward as opposed to looking back.

So her follow up question is that she doesn't have the traffic that a brick and mortar has. But I think to your point, it doesn't matter what size you are or how much traffic you have, whether it's foot traffic or online traffic, the same premise is true that you have to plan your classes accordingly for the traffic.

That you have, you think about, you know, it drives back to cash flow every time. Like no matter whether you're, you know, you're driving that truck and you're doing a smaller volume, if you're putting too much inventory or too little inventory into that operation, you're either going to drive the cash flow or starve the opportunity.

Yeah. One of the numbers that the plan is always built on is a stock to sales ratio. Right. And every class has a different stock to sales ratio. If you want to sell one top, you need four tops to sell one. If you want to sell a bottom, you might need six or eight bottoms to Sell one. And if you're out of proportion, whether you're online or whether you're in a truck and you don't have the right proportion of that inventory by classification, you're not going to optimize the opportunity to do the business.

That's a great point. If you could name, you know, the top, if someone was looking at their plan with their coach, with an affiliate, what are the top three or four areas that they need to look at? The ratios and the numbers that they need to look at. And if we need to define them further so everybody watching understands what those are like a stock to sales ratio. Let's do that.

So you always kind of start looking for either that top 20%. I always look for the top 20% or the bottom 20%. And so what that means is I'm looking at the things first that are driving the volume. Tops. In apparel classes and apparel stores. Tops are where all the magic happens. Right. Everything else kind of comes down from tops. You might be, you might have a great dress store to go along the tops. You might be great with sweaters, you might be great at jewelry and accessories. But tops is what it's all about. And then the bottom part is basically more about, hey, what am I not very good at? What is my customer not voting for anymore? And keeping that in proportion to how much of it you have related to, there's, it's very rare that you like, give something up because across the retail climate, if you have the right customer and you're satisfying them, they're going to buy some of all of those categories. So it's those smaller categories. It can be, hey, you need to go to a different market to try to find new jewelry or you need to take somebody to market with you that has more jewelry focus because you don't wear jewelry. So it's balancing all of that stuff out. Yeah.

Adding to that stock to sales ratio. When we're sitting in front of a plan with a retailer, knowing that you have this understanding of where the sales are going to be, then you can drive down to what your volume looks like right now and understanding that stock to sales ratio. Imagine looking at a plan as a retailer yourself and seeing like this is where my inventory truly should be and this is where, where it is right now. And that's a very, very powerful two numbers to look at. Very simple too. It's just two numbers, right. One is where I am, one is where I should be. So then what do I do? Am I over? And then I look at freshness how fresh am I? How strong is my inventory position in the store? And then from there, you can build some fantastic strategies. I've got too much. I need to build a strategy for Mafia. I've got too little. I don't have the opportunity in place. So just those two numbers on a plan itself can be incredibly powerful and to drive your business.

Yes. So to put it in the simplest terms possible, let's just say dresses, and we'll use round numbers, and we'll use. Not that I would ever recommend this, but we just use a double markup. So if you wanted to sell $10,000 in your dress category, and you have 5,000 in wholesale on hand. Right. And you're marking it up two times, which, again, please, please don't ever do that. And we know that's not enough.

That came out of your mouth, Ashley.

Don't do that. But for round numbers. So even though you may have the adequate number or the adequate dollar amount of wholesale value on hand, we have to know the stock to sales ratio. We have to know what we have on hand in order to meet that threshold. We have to know the age of the inventory that we have on hand, because maybe of that $5,000 worth of dresses, some of it's two, three months old, and your customers have voted it down. They're not buying it. And then just a fraction of it's new. So then when you meet with your coach, because I'm just kind of going through the process for everybody here. So then you meet with your coach, you get those numbers, and now you can see where your holes are and where your opportunities are. So you make a plan together to say, all right, I'm going to mark down part of my dress category to try to get this out of the way and move get that cash out. And now I'm open to buy, if we want to use that term at all, this other percentage of this category. So within dresses alone, we're marking down part. And now we're going out and we're trying to fill inventory in the other part so that at the end of the day, we can meet our goal of 10,000 in that class. Right. Is that a good depiction of how the process works?

I think we need to steal. Ashley.

You got it down pretty well, Ashley.

I need more trips to Arizona, you guys. I need the weather, especially in the wintertime.

Now. You nailed it, Ashley. The problem is, if you're on a POS system, whether you're using Shopify or somebody else, you could maybe get that information if you put four or five or six reports together. But you don't need your reports because you get all that data by your classification on a merchandise plan. It puts together multiple, multiple layers of reporting. All the things you would want to see from your point of sale that no point of sale is able to give you in a way that makes sense that you can get it in one report.

I think we broke up for just a hair while you were talking there, Doug. I'm not sure if anyone else caught part of that. I may have you repeat it that. Let's go ahead if you can repeat that.

So what I was just saying is the Management One plan is basically taking four or five, six multiple reports from your point of sale system and putting into something that you can understand. So then you can use your point of sale system to know what to look at. Most retailers are a little bit even like, I don't even really know what to look at when I'm looking at. I kind of go do a vendor analysis, a standard report that they have. And it tells me this much. But one of the beautiful things about Management One report is you always see.