What do a used book store, garden nursery, and boutique clothing shop all have in common?
No, this isn’t the set up to a joke. Unfortunately, all three types of businesses are at risk of failing if their cash flow isn’t in good shape. According to the Small Business Administration, “inadequate cash reserves” is a top reason small businesses close their doors for good.
So whether you sell novels, shovels, or dresses with ruffles — if you’re a retailer, cash flow is king.
What exactly is cash flow?
Think of it like a checking account. Cash flow looks at all the money coming in and out of your business each month. If there’s more coming in than going out, you’re in the green! If you’re spending more than comes in, read on. That means your cash flow is negative and your business could be in trouble.
Here are three simple ways to get your cash flowing in the right direction.
1. Bundle products
If you sell a number of accessories apart from your core offering, try packaging them together with a small discount. This can also be an effective way of clearing out dead stock while creating goodwill with your customers, who feel like they’re walking away with a great deal.
2. Understand the risks of discounting
If you do decide to bundle products, or offer another type of sale, make sure you know exactly how that will impact your bottom line. You should know the profit margins on every product you sell and your overall cost basis – it’s the only way to determine if you’ll break even with the sale or take a loss.
3. Encourage repeat business
Offering perks or freebies to returning customers helps create loyalty and makes it easier for them choose you over other options. Go old school with a punch card, get creative with a contest, or print an offer on receipts that are good for a future purchase.
If you’re struggling to determine the state of your cash flow, it could be time to call in for some backup. With Xendoo’s suite of affordable bookkeeping and consulting services, you’ll be able to spend more time at the “cash out” bringing the cash in!