Costing the move, not just the plan

The line item nobody puts on the capital request

Between a plan and a rebuilt shop there is a form. Somebody has to write down what the work will cost and what it will bring back. This lesson fills that form in for the rearrangement worked out in the last one: the fittings, the people who install them, and the takings lost while the floor is boarded up. Then it works out how much extra the new arrangement has to earn to pay for itself.

A range decision costs what the stock costs. A layout decision costs three separate things, and the third one is the reason layout decisions get made badly.

1. Fixtures — what you buy, and what you pay somebody to make and install.
2. Labour — shopfitters (the contractors who build and install shop interiors), electricians, and your own team stripping and rebuilding the floor.
3. Trading — the days the shop is shut or half boarded up, when the plan you have not yet installed is already costing you money.

The first two go on a capital request and get scrutinised. The third rarely appears anywhere, and it is often the difference between a two-year payback and a three-year one.

The drawing that failed before it was costed

Ruth's plan went to Coldstrand's shopfitter as a drawing. It came back with one change, and the change was not commercial.

The original drawing moved the till to an island running 9.0 metres, with accessory shelving on its customer face. Set out on the plan it left a 1.05 metre gap between the end of the island and the fitting-room lobby corner. That gap is on the accessible route through the shop and on the escape route to the rear fire exit. Both of those have a required clear width. It is set for access in Approved Document M, the part of the England and Wales building regulations that covers access, and in the British Standard BS 8300-2; and for escape in the shop's own fire risk assessment under the Regulatory Reform (Fire Safety) Order. The drawing did not meet either.

The island was rotated and shortened. The approved plan carries 7.5 metres of till-run frontage, not 9.0. The accessory allocation in lesson 2 is already the number after that check, and the check cost a metre and a half before a single fixture was ordered.

What the fixtures cost

Two of those items are worth a moment. Power and data is the reason moving a till is not the same kind of decision as moving a rail. It drags an electrician, a network cable run and a safety certificate behind it, and it is the single line most often left off a first estimate. Flooring make-good — repairing the floor where a fixture used to stand — is the other one. Lift a gondola that has stood in the same place since the shop was fitted and you find a rectangle of undamaged floor surrounded by seven years of wear.

What the labour costs

Coldstrand can shopfit in two ways, and the choice is a trade, not a preference.

Nights cost 37% more an hour and lose no trade. Closed days cost less an hour and lose a day's takings each. The right mix is not the cheapest labour bill. It is the cheapest total, and the total includes the third cost that is not on this table.

Coldstrand's own team also works. Three staff at 22 hours of overtime each at GBP 16.50, plus a visual merchandiser for three days at GBP 340, is GBP 2,109. Waste removal and the electrical certificate add GBP 680.

Capital and one-off costs: GBP 36,270.

What the shut days cost

Here is the item that makes this a layout decision rather than a purchase.

The refit needs two full closed days and roughly a week of trading behind boards. Ruth books it for the last week of January, and that choice is worth more than most of the haggling over the fixture quote.

Sallowgate's last year gives an average week of GBP 24,019.23 excluding VAT. The last full week of January took GBP 14,238.60, which is 1.14% of the year's sales against an average week's 1.92%. It is the quietest week the shop has, and its achieved margin — the margin actually made after discounts — is 41% rather than the annual 55.3%, because January is trading through markdown.

The boarded days are costed at Coldstrand's standard allowance: a disrupted day trades at 70% of normal, so 30% of the day is lost. Seven of them sit either side of the closure — four after the shop reopens and three at the start of the following week, whose sales run at GBP 2,518.82 a day.

Now do the same sum for a week in October, when the shop trades at its average and its margin is 55.3%. The same two closed days and seven boarded ones would cost GBP 9,076.47 of gross margin. Choosing the week saved GBP 5,033.53 — more than twice the cost of the new till bays, for a decision that took one conversation with the shopfitter about availability.

The bill, and what it has to earn

Against that sits the standing annual charge from lesson 2: GBP 12,538 of identified gross margin on the SKUs coming off the casual tops and denim runs, charged in full every year.

Coldstrand's rule for a fixture refit is that it must pay for itself inside 30 months. So the plan must produce:

• GBP 20,156.47 a year of extra gross margin, after the identified loss, to pay back in 24 months, and
• therefore GBP 32,694.47 a year of extra gross margin before that loss is deducted.

That number is the whole appraisal. It is worth expressing in each of the currencies the shop actually trades in, because "thirty-two thousand of margin" is not something anyone can judge, and "seven and a half more suits a week" is.

Every one of those four is a large number, and saying so is the honest finding rather than a failure of the plan. No single source will produce it. The appraisal was approved on the judgement that three of them together will. The till run and lobby put 12 metres of accessories in front of 1,160 committed shoppers a week who currently see a poster. The unit beside the shirts catches attachment at the point of the shirt decision. And a clear sightline from gate 1 to the suit wall raises rear penetration.

Payback at approval: 24 months on the appraisal's own conservative rules, against a 30-month limit. It is not a comfortable margin, and Ruth said so in the paper.

What gets read twelve weeks later

The paper commits Coldstrand to measuring again in weeks 12 to 14 after reopening: three weeks of counts on the same three gates, and a basket pull on the same definitions. Three readings, each attached in advance to a number and to what happens if it misses:

1. Gate 2 penetration. Approval implies it moves toward 42.5% if nothing else contributes. If it has not moved past 37% by week 14, the sightline argument was wrong and the rear is a routing problem no fixture move will fix.
2. Accessory attachment. The share of baskets containing an accessory, and accessory units a metre-week against the standstill rate of GBP 98.46. Below that rate, the 12 metres are earning less than the 14 did and the till run has not worked.
3. Tailoring units and the second-trip count. Repeat the eight-day fitting-room observation. If staff are still making a second trip in a quarter of fittings, the adjacency was drawn and not solved.

I am appraising a store refit. Here is what I have: [paste the fixture and works quote, the shopfitting labour options, your own team's hours, the store's weekly sales profile across the year, and the achieved margin rate by season].

Build the appraisal with me:
1. Split the cost into four parts: fixtures and works, contracted labour, own-team labour, and waste removal or certification.
2. Ask me which week the work is booked in. Price the trading loss at THAT week's sales and THAT week's achieved margin rate, not the annual average. Then show me the same loss priced in an average week, so I can see what the timing is worth.
3. Price closed days and disrupted days separately. Ask me what allowance we use for a day trading behind boards, and if we do not have one, say so rather than inventing a figure.
4. Ask me whether we model trade recovered after a closure. If we do not, say plainly that the payback is therefore conservative, and in which direction.
5. Add the annual standing loss from any SKUs coming off the floor, charged in full.
6. Give me the break-even: the extra gross margin a year needed to hit my payback rule. Then convert that single number into each currency the shop trades in — units of each category a week, and shoppers a week reaching a zone at the rate it already converts.
7. Draft the three things we should measure again twelve weeks after reopening. Give each one a threshold written before the money is spent, and a sentence saying what it means if we miss it.

Do not forecast an uplift for me. I want the break-even, the assumptions named, and the judgement left where it belongs.