Financial Reporting To Improve Operational Metrics To Lower the Odds of Being Outsourced DENNIS MEKELBURG SENIOR CONSULTANT, INDICO CSANC, OCT 27, 2015

Goals for Today  An Interactive Conversation  Talk about why we should report financial (and other) information  Talk about the “teaser questions” and why they were asked  Provide some information and ideas to use in our stores  Learn about some of the language of outsourcing  Talk about contractor interests and language

What have you done TODAY?

How often do the contractors communicate with your administration?  At least once a month?  NACAS and NACUBO publications  Several times a year?  NACAS and NACUBO meetings  Direct communication  Mailings  Personal contacts

So – What does that mean relative to financial reporting?  To whom do want your administration to listen?

Why Would Your Campus Outsource the Bookstore?  Financial – Perceived or Real  Textbook sales declining – fear about future sales  Fear of the future – digital textbooks  Perceived lack of customer satisfaction  Lack of communication from the bookstore

Why Would Your Campus Outsource the Bookstore?  Are the contractors communicating with your administration?  NACAS  NACUBO  What are they telling your administrators?

How to Address Pressures to Outsource  Financial  Know your numbers!  Especially what the total contribution to the campus is  Improve each primary measurement  Examples:  Cash flow  Textbook inventory arrival/return management

Three Guys - $30  Make Sure the numbers make sense!

How to Address Pressures to Outsource  Textbook sales declining?  Know Why!  Category Sales (New, Used, Rental, Digital)  Unit Sales  Rental Units increasing or declining?  More course materials through the campus LMS?  What is the customer feedback?

How to Address Pressures to Outsource  Fear of the future – digital textbooks  Do you believe these Ads in NACAS magazines by contractors?  “Only xxx can help you seamlessly manage the transition to digital course materials…..”  “XXX is the undisputed leader in helping you create a superior campus store experience”  “We’re your faculty’s advocate – empowering them with groundbreaking textbook research and adoption tools”  “We’re your campus’ retail expert – fueling school spirit with dynamic in-store and online shopping experiences”  “We’re your school’s hands-on partner – delivering what’s next to drive your academic and business success”  “Original and inventive, our solutions are as unique as the bookstores they benefit”

How to Address Pressures to Outsource  Know what the contractors are saying  “We’re your students trusted ally – saving them the most money on course materials and providing the most options”  How are they the trusted ally?  What are the metrics for “saving the most money”  What options do they provide that others do not?

Reducing the Odds  Maintain a list of all services that the current store provides  Include with financial reports  Track every nickel that you provide for your campus and administration  Profit  “Rent”  Utilities  Assessments for administration, IT support, etc.  Required contributions for employee benefits  Contributions to R&R  Departmental, faculty/staff discounts  Contributions to campus related organizations  Are they of high value to some constituency?  Find out if customers care about the services  What is the dollar value of them being provided?

How to Address Pressures to Outsource  Emphasize that the course materials are ordered ON CAMPUS.  Be the course materials expert on your campus  Access code sales in the store and online  Sell through academic departments  Through LMS (Blackboard, etc.)  Fee based, included in tuition  Multiple licenses, delivered to individual students through the LMS, charged to the academic department  Support faculty publication of digital materials  Example - RedShelf as a partner  Know about the competitors  Amazon  Akademos

How to Address Pressures to Outsource  Perceived lack of customer satisfaction  How often do you measure customer satisfaction?  What was the action plan formulated from the last survey?

Reducing the Odds  Know the institutions goals for the store  Are goals for the store clearly stated?  Are they realistic?  Communicate/Communicate/Communicate  Tell – Keep a current list of all that the store provides  Ask  Have you asked for exclusivity for textbook (or other) sales on campus?  Exclusivity is a condition of the contract for most outsourced stores

Reducing the Odds  Operate the store as if it was outsourced  COMMUNICATE!  Financial Goals Achieved  Student Satisfaction  Positive Messages

Reducing the Odds – Tell the Story!  Know what you bring to the table  Complete access for all constituencies  On campus, off campus, faculty, alumni and staff  Policies and Procedures locally derived  Not subject to corporate policies, procedures and dictates  Professional, campus specific knowledge  All course materials decisions make in the store  Access to all technologies for price comparison and sourcing  Examples - Verba / Sidewalk / Rafter  Access to technologies for digital migration  Example - RedShelf

Campus Contribution Worksheet Campus Contributions Worksheet Store Net Sales Discounts All discounts - students, faculty/staff, sapecial sales, etc. Rent Commission Donations Monetary and in-kind (books to audio, etc.) Scholarships Institutional Support Cost of 3rd party partnerships that are focused on student satisfaction Bad Debt Rebates In a contracted store many, if not most, of these go to home office Utilities (on campus utilities only) Net Income Other (non-sales income) Grad, Amazon etc. TOTAL Contribution as a % of sales#DIV/0!

Teaser Questions “Why does it matter” to each question  When you take your annual physical inventory, how do you determine the cost value of the inventory? If you use system cost as the number, how is that cost calculated?  What do you believe is an acceptable number (as a percentage of retail sales) for mark- downs from retail for product that doesn’t sell at the initial retail price?  How many full-time or part-time positions have you filled during the last fiscal year?  How many full-time or part-time positions have you not filled during the last fiscal year?  How many adopted titles are on the shelf for Fall, 2015?  How many adopted titles were on the shelf for Fall, 2014?  What is the additional charge, paid to the institution, for each dollar paid in salaries or wages? (Benefits and / or administrative charge)

Teaser Questions “Why does it matter” to each question  What is your total personnel cost, as a percentage of net sales?  What percentage of your sales for course materials are fulfilled through web sales?  What percentage of your sales for general merchandise are fulfilled through web sales?  What percentage of your course materials sales through the web include at least one SKU of general merchandise?  What is your marketing / advertising expense for this fiscal year, and how much of that number is dedicated to the web?  What is the metric your store uses for the shipment of received web orders relative to the receipt of the order?  Do you use dynamic pricing for any of your course materials?  What expenses have you purposely increased or decreased during this fiscal

What have you done TODAY?

Reducing the Odds – Two Things: 1. If you have additional strategies that will enhance and supplement our endeavors – please send to me! 2. THANK YOU! Contact Information: Dennis Mekelburg Senior Consultant indiCo