Focus on the fundamentals
My 2025 word of the year is "fundamental." Here's how I'm applying that to my business.
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I stopped making New Year’s resolutions a long time ago, but for the past few years, I’ve been embracing this idea of picking a word at the new year to serve as a kind of intention setting.
This year, as December came to a close, the word that popped into my head was “fundamental.” I decided to go with it because… it’s a really good word to guide you while running a business.
You see, I have a hard time keeping things simple. I get too into the weeds of everything all the time, especially when it comes to analyzing performance or planning the year’s initiatives.
The truth is, it doesn’t really matter what our top-selling greeting card was in 2024—or what stickers we order in 2025. Once you hit a certain operational stride in a retail shop, you can run some things on autopilot and hire people to make decisions for you.
What really matters is: how is the business doing?
And also: how do we know?
And from there we can decide: what, if anything, are we going to do about it?
You’d think it would be an easy question to answer: How’s your business doing? Most retail business owners—myself included—instinctively swipe open their phones to check the day’s current ring. I still do it. I get a gut-level reaction when the number by 3 p.m. feels too low. But the truth is, that moment-in-time number no longer tells me how Fernseed is really doing.
What you ring in a single day—especially after you’ve been in business a few years—means almost nothing. Yet that number is always right there: easy to grab hold of, easy to feel something about. Same goes for whatever product is right in front of you, especially if it’s not merchandised correctly. “Are these selling?” you wonder. But again, it doesn’t matter.
Thinking about this idea of fundamental, I made a list of the only things that truly matter in my business—what I’ll use to guide how I track and measure things this year.
This is also how I will decide what, if anything, we are going to do about it. This way I won’t get lost in the weeds of how many stickers is the optimal number to display at the cash register.
So what are the metrics I’ll be measuring this year?
Here are my 12 fundamentals.
Profit. Is the business profitable? Are we making more money than we are spending?
Break even. How much revenue do we need to generate each month, given an average margin that we can assume on all sales, to pay our bills and start generating profit? (And how much of that needs to go to debt repayment?)
Gross margin. What is our average gross margin? How does that differ between plants, flowers, and everything else?
Debt. How much debt are we currently carrying and how much are we paying in interest? Are we meeting our debt pay-down goals? When is the debt scheduled to be fully paid off given the current payment schedule?
Key ratios on core expenses. What percentage of revenue do our payroll, fixed and variable expenses, and cost of goods represent? Are we in range of industry benchmarks?
Sales trends by category. What percentage of our sales do plants, floral, wedding and everything else comprise? Is this ratio changing over time? Seasonally?
Top 20% of products driving 80% of revenue. What are our top-selling products according to the Pareto principle?
Key inventory ratios. What is the relationship between our total inventory on hand and monthly sales? Is there a sweet spot? (i.e. How much inventory do we need to have on hand in order to produce our target revenue? How much is too much?)
Customer relationships. How many active customers do we have, and what percentage of those are first-time versus returning? How do first-time customers find us?
Shop traffic and conversion. How many people visit the store and website each day, and how many of those people make a purchase?
Average cart value. What is the average a customer spends in a given transaction in the shop and online?
Trailing 365. Are our sales increasing, declining, or staying the same when we analyze a rolling data set of the past year?
Some of these metrics are easier than others to pull out of our shop and accounting software. None of them need to be measured daily. I’ve committed to analyzing them quarterly, which means in the next couple of weeks, when we wrap our books for Q1 of 2025, I’ll be able to run the first diagnostic based on these limited data points.
I’ll be sharing these numbers throughout the year with paid subscribers.
Staying this high level so far this year has truly allowed me to stop filling my days with busy work, to delegate decisions, and, maybe most importantly, to stop feeling guilty for not always working on something. I can take breaks, and have a family life—because that’s fundamental, too.
I’ll keep coming back to these fundamentals throughout the year—and I’d love to hear what yours are!