Cash flow problems are a common problem for nearly any business these days, and independent retailers are no exception. Here are six things retail store owners can do to make an immediate improvement in their cash flow.
Cash flow is an ongoing challenge for independent retailers, as it is for many small businesses. Sales growth remains modest at best, and credit remains largely unavailable to many independent retailers. That puts many squarely behind the eight ball.
Here are six tips that can help you drive more dollars to the bottom line:
These are the customers who have demonstrated already that they value what you do and the merchandise you sell. What else can you offer them? These are customers who have shared their email addresses with you. This is your list, and it’s one of the most valuable assets you have. Marketing to these customers is much less expensive (and more productive) than marketing more broadly using expensive traditional media, like newspapers and magazines.
Having more doesn’t mean you’ll sell more, especially when the extra inventory is in unnecessary depth of stock or in items at the fringes of assortments. Lean inventory, closely aligned to support prudent sales plans, promotes a greater sense of urgency with customers to buy now, when they first see it, rather than wait for when it might go on sale. Replenish more frequently, in smaller quantities, continually bringing in new, fresh, exciting merchandise.
Many independent retailers will want to adopt a Better-Best or a Best-Only pricing structure. Offering too many options where customers can trade down to a less-expensive item leaves money on the table and slows the turn on the higher-priced offerings, thus lessening their perceived value. If consignment merchandise is part of your mix, make sure they complement rather than compete against your assortments.
Sales and promotions melt away cash flow, not to mention the fact that they lessen the perceived value of your offering and encourage customers to wait for the next sale. Getting paid also requires, however, that you fully mark up your merchandise in the first place. Markups tend to naturally erode as wholesale costs increase and retail prices don’t fully keep up, unless you actively manage your markups to keep them where you need them.
For most independent retailers, payroll is the largest cash outflow after merchandise payables. A payroll that is primarily made up of salaried and full-time hourly employees may provide a level of stability but can be pretty inflexible and can create significant cash flow challenges, particularly during slower periods. A more balanced payroll, between salaried and full-time hourly employees and part-time employees, provides the flexibility to more closely align payroll dollars with when they are truly needed.
Familiarity is comfortable, but it leads inevitably to diminishing returns. Customers thrive on newness — on new merchandise, presentations, and experiences. Repetition breeds staleness, and that will drive customers elsewhere. The most successful independent retailers are always re-inventing themselves, testing new items, programs, presentations, and concepts.
After all that we’ve been through, how much cash flow is enough? It’s not enough just to be cash flow positive. The challenge is to generate exceptional cash flow from the sales revenue you’re generating, even as you work to grow revenues even further.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Related Articles
10 Ideas to Keep Cash Flowing
by Team ZenBusiness, on October 25, 2024
Creative Cash Flow Strategies for Small Business
by Team ZenBusiness, on October 30, 2024
Retail Operations Tips
by Team ZenBusiness, on October 31, 2024
Tips For Scaling Your Startup Retail Business
Team ZenBusiness, on November 14, 2024
10 Ways to Increase Your Small Business Profits
by Team ZenBusiness, on November 05, 2024
5 Ways to Weather a Cash Flow Drought
Discounting to Create Cash Flow? Be Careful.
Tips For Optimizing Your ATM Cash Distribution Network
Start Your LLC Today