This is a guest post from Sam Novick, Senior Editor at Funding Circle.
Retail businesses run on razor-thing margins. Every penny counts.
If you want to be successful in retail, you can’t only focus on money-making — you need to prioritize money-saving. And with coronavirus disease (COVID-19) disrupting regular operations and causing financial difficulties for businesses around the world, finding ways to conserve cash is as important now as ever.
While that might be easier said than done, we have some real-life, practical tips to help you keep more money from every sale.
Not every tip below will work for you, and that’s just fine. Try one, maybe two, and watch your profit margins go up and to the right.
1. Consolidate or refinance high-interest debt
When your business was starting up, you likely had to take on debt to get it off the ground. With little credit history and revenue to show, your small business loans probably came with some unsavory terms and rates.
Fortunately, you’re not stuck with it. Refinancing helps you pay off your old high-interest debt in favor of a new loan with better rates and better terms. And consolidation could turn your many expensive debts into one more affordable monthly payment.
2. Automate the minutiae
Time is money. Every additional second increases your business’s earning potential.
While you can’t add more time to the day, you can use automation to win back wasted minutes. Thanks to AI, technology helps you handoff several of your trivial responsibilities.
- Auto-scheduling. Ditch the spreadsheets and calendars and automatically schedule all your staff with a single click. Easy as that. Plus, AI will remember that this week last year that you needed extra hands on deck, and they’ll staff appropriately. Digitzation at it’s finest.
- Automated bookkeeping. Bookkeeping tech, like Sunrise, automates much of your tedious financial upkeep. Set up automatic payment reminders, schedule recurring invoices, and import and categorize your expenses automatically without wasting hours at the end of every month.
- Automated payroll. Software like Gusto automatically takes care of things like direct deposits, issuing W-2s and 1099s, and every retail owner’s favorite task — local, state, and federal payroll taxes. You can even set your payroll on AutoPilot (and mostly forget it).
- Automated human resources. HR tech, like BambooHR, allows you to streamline time-intensive processes like applicant tracking, onboarding, time-off management, and employee self-service, which can save you serious money save you serious money in the long run.
ProTip: When you’re looking for software, choose solutions that integrate with other systems to save you even more time and money (and make life that much easier).
3. Scale slowly
While it’s great to plan ahead, don’t pay ahead if you don’t have to.
If your business only needs one delivery van right now, don’t buy two because you’re eventually going to need another. And instead of renting a massive warehouse that you’re only partially utilizing, consider smaller storage units.
Cutting costs like these can significantly decrease your overhead.
4. Opt for used instead of new
Everyone likes brand new shiny gizmos and gadgets, but used equipment is often half the price with close to the same utility.
You can find used furniture, office equipment, and computers that function just-like-new but without the hefty price tag. Buying used isn’t always as fun, but it sure does save you a pretty penny.
5. Consider leasing
Maybe you don’t need to buy new or used — perhaps you should lease. With leasing, you usually get the latest model and don’t have to worry about upkeep, repairs, or depreciation. Plus, when the lease is over, you often have the option to buy the equipment at a discount.
Leasing isn’t always the best option, but there are several scenarios where it’ll help you save money in the short term and long term.
6. Try low-cost advertising alternatives
Instead of highway billboards and expensive TV ads, try more modern low-cost advertising alternatives.
Experiment with SEO, YouTube ads, email marketing, influencers, or pay-per-click (PPC) ads to see what works for your retail business. If one (or more) of these methods resonates with your audience, you could save a considerable chunk of change on your customer acquisition costs.
7. Optimize your inventory
Too much inventory, and you’ll waste money on storage, depreciation, and overstock discounts. Too little inventory, and you’ll miss out on sales and acquiring new customers.
Stocking your shelves doesn’t have to be a guessing game. Use inventory management software and demand forecasting to help you maintain just the right amount of inventory to satisfy demand.
Also, consider getting inventory financing. You’ll have to pay interest on the funding, but the extra cash flow now could help you save a lot more money later.
8. Invest in the right technology
Old hardware and tech maintenance can be decreasing your business’s efficiency while costing an arm and a leg. New technology can run in the cloud and doesn’t require the same expensive expertise to set up, maintain, and update.
Before you spend hundreds or thousands of dollars on costly software, check to see if there’s an open-source solution. Open source is code that’s free to use, modify, and enhance. You can find open-source tech for everything from accounting to communications to photo editing.
9. Revisit your pricing and your stock
When’s the last time you evaluated your pricing? With overhead costs continually changing (and likely, increasing), you want to make sure you’re adjusting prices accordingly.
Calculate your Cost of Goods Sold, or use this handy calculator, to determine the costs involved in making the product you sell, and to ensure you’re charging enough.
Take it one step further and evaluate which products are working and which aren’t, for your retail business. Calculating contribution margin and contribution margin ratio will help you get a better understanding of how products are contributing to your bottom line, and which items make the most sense to stock.
10. Audit (and minimize) your expenses
With so much going on — all the time — and a thousand things to do daily, it can be tough to set aside even an hour to dig into your financials. But, analyzing your profit and loss statement and regularly balancing your budget could also save your business some substantial cash.
Do you actually use that file-hosting service you’re paying $10 a month for? What about that business phone line that’s setting you back $30 a month, which translates to $360 a year? While this all may seem like chump change, it can add up — quick. And cutting these unnecessary expenses could boost your cash flow.
Do competitive research and see if you can score a better deal. Maybe you can get a perfectly good landline for your retail business for only $15 a month, which could save you $180 a year.
Talk to your suppliers and see if they’d be able to negotiate on price, or be willing to offer you a discount if you buy in bulk. You may also find through a bit of research that you can source the same product, but at a significantly lower price from a different supplier.
Reduce your labor costs — part-time or temporary workers could save you in overtime and mandated healthcare expenses. Analyze employee turnover, and consider different strategies you can employ to retain employees.
Nothing is too small — a bunch of little savings could minimize your overhead, and have a massive impact on your profit margin.
Save to succeed
Retail businesses don’t need viral content or radical products to be successful—they just need to nail their profit margins. If you’re already selling like a pro, then all you need to do is start saving like one.
Experiment with these cost-cutting tips to see how much additional cash your business can save. You’ll be surprised how pennies here and there add up to huge savings down the road.