Whether it involves employee theft, shoplifting or some other real loss, you actually lost a lot more than $1,000. And I mean real money. One of the advantages I have as the former Senior Loss Prevention Executive for several major companies, is that I bring a larger scope of experience to you, the small and medium business owner or manager.
Okay, so the thief got away with $1,000 of your merchandise but that is not all you lost. That merchandise had to be purchased, paid for, shipped, handled by your staff and made available for sale to your legitimate customers. In many cases we do not factor these tasks and the ever tighter profit margins we work with into the loss equation.
As an example, let’s say that your profit margin after taxes, labor and other expenses like rent, electricity, gas…. is 1.5%. Actually this is an average for most US retailers. Some have a higher profit margin others like grocery stores average less than 0.5%.
So take your loss, in this case $1,000 and divide by your margin, again in this case 1.5% (.015). The result is $66,666.67. That is your actual loss. You are going to have to sell another $ 66,666.67 simply to BREAK EVEN on a $1,000 loss! How many more merchandise items will you have to purchase and sell to do this? And remember that is only to break even on the $1000 loss NOT to make a profit.
Oh wait a minute – you have insurance. Few policies cover this kind of loss. If they do, try putting in for several of these claims. You will probably find yourself looking for a new insurance carrier after they drop you or raise your rates through the roof.
There is only one way to do this and be profitable: prevention. You must stop losses before they occur. In addition your loss prevention efforts cannot consume all of your time or resources. Otherwise you lose focus on your sales. But the LP effort has to be a part of your standard operating environment, not on and off. You would not turn off the power to your sign every other day to save money. Why would you do that with loss prevention?
The really great news is that a solid loss prevention program is neither expensive nor difficult for the small to medium retailer. You should look at loss prevention in three areas that are all working together at the same time.
First is Training & Awareness – have you set the standard right from the very beginning with your employees? Do they know what is expected of them and their performance including their responsibilities to protect your assets? Do they understand you do not tolerate any theft by them or their friends regardless of size?
Second – do you have an operational audit or review of your operations? Do people actually know and believe that you look in depth into your operations and losses. Are you ACTUALLY holding them responsible for their performance?
Last is investigation. You must look into and understand why a loss has occurred. Then take action to keep it from occurring that way again. Thinking that it will go away or even worse fix it by itself is ridiculous. IT WILL ONLY GET WORSE.
All of then feeds back into Training and Awareness. Once you start this cycle if will feed on itself. You will even find that your core employees will pick it up and go with it. I have other techniques to this process that you may find helpful. Give me a call at 770.426.7593 x101 if you would like to discuss this or any other loss prevention issues. Again, remember shoplifting and employee theft losses can be controlled!
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