Hi, i”m Christine. I am a dog mom to 2 dogs and a human mom to 3 daughters. I have successfully helped businesses make a profit. This is an important distinction. Sales do not always equal Profit. Let’s talk. ❤
So you started a website but you’re not making a PROFIT…read on….
How Do You Make Money?
A website is exciting! You’ve got your vision and the creative juices are flowing. Maybe even sales are coming in…but are you making a PROFIT?
Retail Math – ew, but yes….
Click HERE for Intro to Retail Math Definitions. The focus is on analytics that grow your profits. Understanding the path and math to your profitable store can be confusing. Don’t let that stand in your way of thriving!
F*ck Margin, Let’s talk Time
Wait, what’s margin? Well, if you clicked the link above, you now know what margin is. Most retailers over-prioritize holding on to margin longer than they should. Look, it’s painful to mark something down – you brought something into your inventory thinking it would sell really well and it didn’t. Accepting that as soon as possible (and even earlier) is key to manage cash. Don’t let margin be a bigger priority over time.
Cash is King
The biggest drain on your cash flow is inventory. Since your rent and utilities are fixed costs, it’s easy to predict or plan for these. But when it comes to inventory, it’s much harder to predict what will sell and what will not sell when you buy for your store.
Profit and Loss
The mistake most people make is they track their P&L (profit and loss statement) each month and use that to run the business. Here is the issue with that. The P&L is a look at the past, and you need to plan for the future. If you have a great month in sales (and thus a great P&L), you may be tempted to buy a bunch of inventory. However, if sales slow down, the bill still has the same due date, and suddenly you do not have as much money to pay bills as you thought.
High levels of cash flow do not mean high levels of profit (or any profit at all). Just the way high levels of profit do not mean high levels (positive) cash flow. Make sure you are using an accounting system that can show you a cash flow analysis. Being able to track the months of cash you have on hand (meaning the number of months you can continue at the current sales and expenses rate) is paramount to surviving in retail today.