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Profitable Times Newsletter

Core Segments of a Museum Store Business Plan

A business plan is a formal statement of goals and plans for reaching those goals. It typically addresses the store from financial, product selection, operations, and marketing perspectives. In the past, 30 or more pages would be routine, but now the focus is more on using the process like a checklist to make certain all business benefits — actions that result in positive outcomes — of a store's presence are addressed.

There is another benefit to creating a business plan that cannot be ignored in a nonprofit setting. As many of you have experienced, often the store is not regarded as highly as other departments within the institution. However, the preparation of a carefully crafted business plan raises awareness of the professionalism of the retail operation and helps to secure a seat at the table where input about, for example, store performance expectations or number of catalogs to be sold through the store, can be shared directly with the museum's management.

Potential business plan topics, contexts, and goals can / should include the following:

Clarity

A goal for the business plan is to bring clarity to the operation. By diving deeply into all aspects of the operation, nonessential items can be pruned to ensure the available resources, including personnel and financial, are focused on the most essential elements of the business. In general, these mental gymnastics are energizing and essential for idea quality and coherence. Every statement of "need" and "want" should include a description of the reasons why. For example, it is not sufficient to express a desire for new jewelry display cases without supporting the request by statements about the appeal of jewelry to women, if that is a core store constituency for you, as well as facts about the high margins and revenue per square foot generated by jewelry.

Tracking

The plan can be a touchstone to ensure the store is staying on track as it changes and grows. A business plan is a living document, and between "official" revisions, it can be used as a roadmap, the supple spine of the business. This can be done by periodically comparing the business plan revenue, expense, profit, and other projections to actual results and making adjustments to improve future results.

The Numbers

I believe it is worthwhile to record everything so that there is something concrete against which to make comparisons. Recording data should include having income statements prepared on at least a quarterly basis. The plan can include the following benchmarks against which to measure actual results.

  • Revenue goals for the retail operation as a whole and / or by segment, such as brick-and-mortar, e-commerce, catalog, additional locations and / or even by product category.
  • Average transaction, units per transaction, cost of goods sold, capture rate, and gross margin return on investment, for example, according to your institution's priorities.
  • Expected return on investment from several perspectives, including broad measures such as social return on investment, and more targeted measures, such as marketing and staffing.

Market Analysis

Three of the most important questions to be answered by a business plan are the following:

  • Who is the customer? I use "customer" in this context because the intention is to include not just the museum visitor, but also destination store customers, e-commerce buyers, and possibly wholesale and licensing customers.
  • What do your customers want to buy?
  • How much are your customers willing to spend?

Personnel

How many full- and part-time employees do you need to meet your goals? Job descriptions for each position should be addressed in this area as well as the balance between paid and volunteer personnel, the financial impact of benefits for paid staff, wage competition to hire and maintain quality staff, and the increasing minimum wage. It is key, in particular, that the manager of the store has the responsibility and the authority to manage all aspects of the store, especially product selection (which when done by committee is a formula for an indistinct product selection and less than maximized financial results).

Accountability

Accountability is broader than just looking at the numbers. This section of the plan should include the following:

  • The mission statement: This is a statement separate from the institution's mission statement.
  • The vision / identity statement: How do you define growth / progress for the store? How do you expect to get there?
  • The goal of product selection: How do you achieve breadth for visitors of all interests and economic ability?

Communications

Include plans to connect — via signage and person-to-person contact — with everyone who comes in contact with your store, and plan for the store to be mentioned in every piece of literature produced by the museum. Your message needs to reach visitors, members, tourists, volunteers, the community, staff, the board, stakeholders, and museum administration.

Competition Analysis

To avoid losing the support of businesses in your community by competing unfairly — not to mention possibly raising unrelated business income tax issues — make sure your product selection is closely associated with the mission of your museum and exhibits. This does not mean that you won't compete with commercial retail stores, but it does ensure that you will be doing so on firm ethical footing.

Based on recent conversations and ShopTalk threads, MSA members are increasingly exploring the ways business plans can be used as a tool to confirm that all the day-to-day aspects of managing a store are addressed in a focused and coherent manner, and this list can ensure you are on the right track.

 
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