Business Health Check – Supermarkets

The Business Health Check – Supermarkets provides accounting firms with a comprehensive set of supermarket-specific resources for evaluating both the financial performance and the day-to-day operating drivers of a supermarket business.

The package supports the complete advisory engagement — from gathering client information and analysing industry-specific KPIs through to break-even, working-capital and ratio analysis, benchmarking, scenario modelling, reporting and an agreed Action Plan.

Industry-Specific Supermarket Business Health Check Workbook

At the centre of the product is the Supermarket Business Health Check workbook. The workbook gathers detailed information about how the supermarket operates and links that information to a comprehensive Key Performance Indicator analysis.

The client data collection process covers areas including:

• Trading calendar and store-opening hours
• Customers and customer locations
• Sales and methods of payment
• Departmental and product-category sales
• Internet sales
• Cost of goods sold and gross profit
• Working owners and principals
• Employees and staffing
• Staff training
• Retail floor space and store measurements
• Stock and inventory
• Balance Sheet information
• Operating expenses
• Profit and Loss information
• Major suppliers and purchasing activity

Supermarket Key Performance Indicators

The information collected in the workbook is used to produce a supermarket-specific KPI analysis covering the commercial and financial drivers behind the client’s results.

The report brings together areas including:

• Sales analysis
• Sales dissection
• Customer analysis
• Gross-profit analysis
• Business-performance measures
• Wages and staffing
• Operating expenses
• Profitability
• Supplier analysis
• Productivity
• Ratio analysis
• Broader financial analysis

This enables your firm to move beyond reviewing the supermarket’s accounts and instead discuss the operating factors that may be contributing to changes in profitability and cashflow.

Customer Behaviour and Store Traffic

The supermarket workbook contains detailed measures that can help your firm examine where customers are coming from and how effectively store traffic is being converted into sales.

Customer-related measures include:

• Customers from different postcodes
• New customers as a percentage of total customers
• Average sale to new customers
• Sources of enquiries
• Shopping-centre visitors compared with supermarket customers
• Visitors-to-store conversion percentage
• Loyalty-program customers
• Customer complaints
• Product returns
• Customer suggestions
• Phantom-customer or mystery-shopper reporting where used by the business

These measures can support practical conversations about customer attraction, retention, conversion and the overall effectiveness of the supermarket’s marketing and service activity.

Sales and Average Transaction Analysis

The resources allow your firm to examine sales in greater detail than simply comparing total revenue from one period to another.

Measures can include:

• Total sales and movement from the previous period
• Daily sales
• Average sale
• Average internet sale
• Sales per full-time-equivalent person
• Sales per total hours worked
• Sales per total store-opening hours
• Sales per square metre, excluding internet sales where appropriate
• Sales generated from new customers
• Cash, credit and internet sales

Department and Product-Category Performance

A major strength of the supermarket workbook is the ability to dissect sales and wages across individual departments or product categories.

Available categories include areas such as:

• Fruit and vegetables
• Deli
• Meat
• Grocery
• Dairy products
• Frozen products
• Bakery products
• Seafood products
• Tobacco products
• Liquor
• Variety
• Service-station products where applicable
• Other sales categories used by the business

This allows your firm to discuss whether individual areas of the supermarket are contributing appropriately to sales and gross profit and whether staffing allocations align with the activity being generated.

Gross Profit and Floor-Space Productivity

The resources help your firm examine gross-profit performance in conjunction with the amount of retail space being used to generate those results.

Analysis can include:

• Gross-profit percentage
• Gross profit by individual product or department
• Gross margin per square metre
• Net profit per square metre
• EBIT relative to available floor space
• Sales per square metre

These measures can help identify departments, categories or parts of the business that may require closer investigation.

Staffing, Wages and Productivity

Labour is a significant operating cost for most supermarket businesses. The workbook therefore includes measures that connect wages and staff activity with sales and gross-profit performance.

The review can consider:

• Total staff numbers
• Salespeople and other team categories
• Wages as a percentage of sales
• Sales per full-time-equivalent person
• Sales per total hours worked
• Staff allocation relative to working owners
• Staff training hours
• Staff training per full-time-equivalent person
• Staff training as a percentage of total hours

Stock and Inventory Performance

The product includes stock and inventory measures that can help identify whether too much working capital is tied up in inventory or whether stock-management performance is changing.

Measures and supporting analysis include:

• Stock on hand
• Stock in transit
• Stock purchases
• Stock days
• Stock turn
• Inventory investment
• Supporting stock-management guidance

Supplier Analysis

The supermarket workbook also allows major supplier expenditure to be reviewed over time.

This can help your firm and the client consider:

• Changes in expenditure with major suppliers
• Supplier concentration
• Supplier reviews undertaken by the business
• The relationship between purchasing patterns, stock levels and gross margins

Break-Even Analysis

Break-even resources are included to help establish the level of sales or gross profit required before the supermarket begins generating profit.

The analysis can support discussions around:

• Sales
• Gross-profit margins
• Fixed and operating expenses
• Break-even activity
• Targeted profitability

Working Capital Evaluation

A dedicated Working Capital Evaluation helps your firm examine how much cash is tied up in the operating cycle of the supermarket.

The review can consider:

• Debtors where applicable
• Stock and inventory
• Creditors
• Bank balances and facilities
• Working-capital requirements
• Liquidity and current-ratio considerations

This can help identify opportunities to strengthen cashflow through better management of inventory, purchasing and other working-capital components.

Ratio Analysis

The product includes a Data Required to Complete Ratio Analysis form and Ratio Analysis Report, supported by papers explaining Profit and Loss and Balance Sheet ratios.

This allows the supermarket review to incorporate a broader assessment of profitability, liquidity, asset utilisation, gearing and financial structure.

Supermarket Benchmarking

The Supermarkets Benchmarking Report Guide identifies the types of operating and financial information your firm can maintain and compare when suitable current external benchmarking information is available.

Potential benchmarking measures include:

• Sales and gross-profit percentages
• Key operating expenses
• Sales and gross profit per person
• Sales relative to wages
• Sales and gross profit per square metre
• Owner and staffing measures
• Stock turn
• Trading hours
• Rent and occupancy measures
• Selected financial ratios

The supplied resources provide the analysis framework and benchmarking guidance. Your firm can then use appropriate current industry data available to the practice when making external comparisons.

“What If” Sales and Profitability Scenarios

The included “What If” workbook enables your firm to demonstrate how changes in key assumptions could affect the supermarket’s future financial result.

Scenarios can be modelled around:

• Changes in customer numbers
• Changes in average selling price
• Changes in customer visit frequency
• Changes in gross-profit percentage
• Alternative sales targets
• The resulting impact on projected profitability

This creates a forward-looking advisory discussion rather than limiting the Business Health Check to historical performance.

Future Maintainable Profits and Business Valuation

Where valuation is included within the agreed assignment, resources are provided for calculating future maintainable profits and considering the value of the business.

Supporting papers cover traditional business-valuation concepts as well as valuation approaches relevant to businesses developing new products, processes or services.

From Needs Analysis to a Defined Engagement

The package includes the SME Needs’ Analysis, which can be used during an initial one-on-one client discussion to identify areas where the client may require additional assistance.

Once the scope of the Business Health Check has been agreed, the engagement-management resources help your firm turn the opportunity into a clearly defined professional assignment.

Scope, Quote and Manage the Assignment

Practical engagement-management resources include:

• Work Programme/Budget/Quotation Form
• Work Programme Timetable
• Business Health Check proposal template
• Supermarkets Assignment Control Form
• Data-gathering forms
• Sub-report planning
• Allocation of work to team members

These resources help establish the work to be performed, estimate the time required, calculate the quotation, communicate the timetable to the client and allocate responsibilities within your firm.

Business Health Check Report and Action Plan

The individual analyses and findings can be brought together into the Business Health Check Report, providing the supermarket owner with a structured summary of the engagement.

The final report can incorporate:

• Key Performance Indicator findings
• Ratio analysis
• Break-even observations
• Working-capital findings
• Benchmarking comparisons where applicable
• Valuation findings where included in the assignment
• “What If” scenario results
• An Action Plan identifying agreed priorities and next steps

Supporting Technical Guidance

The subscriber material includes supporting papers that help your team understand both the Business Health Check process and the financial analysis behind it.

Guidance covers areas including:

• Key Performance Indicators
• Performance measures
• Break-even analysis
• Working capital
• Stock management
• Ratio analysis
• Benchmarking
• Business valuation

A Repeatable Supermarket Advisory Service

Together, the resources provide your firm with a structured framework for delivering a specialised Business Health Check to supermarket clients.

Rather than developing your own supermarket KPI workbook, operating measures, financial-analysis tools and engagement process from scratch, your team can use a coordinated set of resources to gather the information, analyse performance, identify issues and opportunities, report the findings and establish clear priorities with the client.

This creates an opportunity to move the conversation beyond historical financial statements and provide more commercially focused advice around customer activity, sales mix, margins, staffing, stock, productivity and overall business performance.