I’m about to share 3 steps to budget for retail profits – a crucial topic inspired by a question from our retail community: How do I create a strategic budget to maximize profits in my retail business?
As the CEO of your retail business – you HAVE to know your numbers.
I’m going to say that again: You don’t have to LOVE your numbers, but you do have to KNOW your numbers.
When store owners join RETAILMavens, whether in our group coaching or 1:1 consulting program, the initial call to action is always centered around finances. Why? Well first because we know how important it is that you’re able to pay yourself and your team. But also, because as the captain of your retail ship, knowing your financial landscape is non-negotiable.
Now, if numbers aren’t your love language, fear not. You can and should hire an expert to decipher your financial story. That’s precisely what we do, and if you’re ready to work with us, don’t hesitate to apply here.
But let’s get down to the basics of your store’s budget. Ignoring overspending is not an option. I’m sharing three essential steps to guide you:
Budget for Retail Profits Step 1: Align Expenses with Sales
Begin by aligning your expenses with your sales. This may seem obvious, but it’s honestly an issue for almost every store owner we start working with. Inventory is usually your biggest expense, aim to keep your inventory costs between 48-50% of your sales. Next, there are retail benchmarks for all other expenses like payroll, rent, utilities, and more, that we share with you inside our Sales Breakthrough System. The bottom line is that your expenses, including profit, should never exceed your sales.
Budget for Retail Profits Step 2: Increase Margins for Breathing Room
Next, the best way to give your budget more breathing room is to boost your margins. Aim for an initial markup of at least 55%, with a challenge to reach closer to 60% as an average for the store. It’s a game-changer for financial stability.
Budget for Retail Profits Step 3: Implement a Cash Flow Management System – Profit First™
Now that your budget is in a healthier place, it’s time to take it to the next level with a cash flow management system like Profit First™. Use this method to allocate a specific percentage of your sales to profit, taxes, owner’s pay, inventory, operating expenses, and debt. This not only refines your budget but also reduces the stress of cash flow fluctuations.
Implementing Profit First™ is accessible for anyone, but for tailored insights, consider a Profit First™ assessment from a certified professional. Ideally someone like RETAILMavens who can help you customize this process for your retail store.
Ready to take your numbers to the next level? Join my free class, where I’ll guide you on calming your cash flow chaos and using Profit First™ to create predictable profits.
Numbers might not be everyone’s love language, but they’re the language of a successful retail business. If you’re ready to navigate these waters with confidence, I’m here to guide you.