Article: Know Thy Numbers: The Secret to Capital Approval
Common Pitfalls of Capital Denial
For Loss Prevention executives, there is nothing worse than failing to get capital approval for funding an initiative he or she passionately believes will reduce shrink, improve safety, or achieve some other important objective for which the CEO is holding the LP department accountable. Every LP executive has experienced this temporary feeling of defeat, and the second and third time it happens is no less painful than the first. Unlike the minimal time it takes for most failure-induced frustrations to subside, the sting felt after getting denied the capital needed to make ones mark lingers on for a very long time.
In preparation for this article, several Loss Prevention executives were asked about some of their unsuccessful attempts for capital approval over the span of their careers. What was discovered was rather interesting. Every executive attested to the fact that they knew their numbers as they pertained to the estimated returns on investment (ROI) from the capital they were asking for. However, only a handful were able to say for certain that they factored in all of the benefits their organizations would have received if they were awarded the capital.
The fact that “knowing the numbers” is extremely important for an executive is common business knowledge. But what seems to be elusive is identifying exactly which numbers should be known, particularly when seeking approval for a capital investment. For example, let’s assume capital is being requested to purchase Gatekeeper Systems’ Purchek® pushout theft prevention system, a solution that prevents shopping carts filled with stolen merchandise from leaving the store. In this scenario, let’s also assume the ROI calculations for this solution indicate the retailer will reduce shrink by $1 million annually. Armed with this information, it would be unwise for an LP executive to simply inform the company’s senior executives about this shrink reduction without including the other benefits this solution provides. Although the shrink reduction calculation may be accurate, the $1 million shrink savings does not accurately reflect all of the additional benefits such a reduction will provide.
In order to fully understand why the approach above was unwise, let’s expound on this scenario. If the LP executive requesting the capital was well in-tune with pushout theft statistical data that were unrelated to shrink, he or she would have a more comprehensive argument for supporting capital approval.
Examples of important pushout theft statistics unrelated to shrink can be found at www.PushoutTheft.com. There, we learn that 10% of all shoplifting apprehensions ended in violence. This is an extremely important statistic for supporting capital approval for Gatekeeper’s Purchek solution because employee safety is always a top concern for executives. Sharing the fact that the Purchek solution actually prevents shoplifting without the need for shoplifter confrontations would be music to the ears of any executive committed to protecting assets while keeping employees safe.
Another statistic found on PushoutTheft.com is that 32% of all pushout thefts are related to Organized Retail Crime (ORC). This statistic is important because executives understand that professional boosters are just that – professionals. No one wants professional criminals in their stores because not only do they steal large quantities of merchandise, but they are also more likely to be violent.
Speaking the Language
The differences between the two aforementioned approaches should be glaring. The leaders of every department within the retail hierarchy are all vying for the same capital. Almost all capital requests are for projects that add profit dollars to the bottom line. But understanding how to mine for data that helps to paint a complete picture of all the benefits a project will yield is paramount in order to get capital approval. In this case, the safety of employees and customers is worth far more than just shrink reduction. In fact, most, if not all executives believe the safety of employees and customers is worth far more than any other new investment other department heads are trying to get funding for.
The fact is, apprehending shoplifters is becoming a thing of the past. The frequency of violent confrontations during the act of apprehending shoplifters is increasing, and senior executives are looking for solutions. They just need those asking for capital to deliver a compelling case for capital approval. In this case, the compelling data can be found at www.PushoutTheft.com.