How can you make sure you’re profiting in the retail off-season? This was a great question I received in our retail community recently, and I know many of you can relate.
First things first—profitability is the goal, no matter the season. However, in a retail off-season, cash flow can take a dip, even if your business is profitable. So, let’s not just aim for profitability; let’s manage cash flow intentionally during the busy season and plan for the slower months. To relieve some of that pressure. To get some financial peace of mind!
Retail Off-Season Profitability
Let’s start by examining profitability. Making a profit means having more money come in than go out. Expenses can be categorized into variable and invariable (fixed) expenses. Invariable expenses, like rent and utilities, remain constant whether you’re in a busy or slow season. These costs are incurred regularly and are essential for the store’s basic operation.
On the other hand, variable expenses, such as cost of goods sold, supplies, and payroll, fluctuate with business activity. These expenses directly correlate with sales volume, as sales increase or decrease, variable expenses will follow suit.
Quick side note on payroll—many consider it a fixed expense, but we recommend matching it to your sales. During slower months, you likely won’t need as much staff on hand.
To become profitable you’ll need to optimize both types of expenses to make sure you’re not paying more than you absolutely need to. When you’re in an off-season, are your fixed expenses still manageable? Creating a retail budget is helpful for this.
Retail Off-Season Cash Flow
When managing cash flow, having a plan is key. Use a cash flow projection to map out your year, ensuring you know what to do with extra cash during busy months to mitigate negative cash flow during slower periods.
Hands down, the best cash management system I’ve found is Profit First™. This process gives every dollar a job, giving you peace of mind during those off-season months, or times of year when expenses rise – like tax time! Imagine the relief you’d feel knowing that the money is there waiting when you need it!
However, store owners need to tweak this method to suit their unique financial needs.
Inside our Profit First™ powered by RETAILMavens program, we help store owners tailor this method to work its magic on their finances. I’ll delve deeper into why this is the recommended method in my free training, Calm the Cash Flow Chaos: Create Predictable Profits. If you’re tired of running a non-profit business, it’s time to join me – click here to register now!