Steps to protect your retail business from economic downturns

Written By Steps To Faculty Published June 29th, 2010

The recent recession has taught us all many lessons. Business owners have learned to value existing customers that buy their products on a regular basis and the value of having savings and a steady cash flow. This is especially true for retail business owners, who depend upon consumer patronage to keep their business afloat and to feed their families. But as you may already know, the retail business is greatly affected by the economy. When consumers have purchasing power, i.e., available cash after expenses and retirement savings, they have more money to spend in retail stores. On the other hand, if consumers must pay higher taxes or have lower wages, then their ability to spend in your store is less. Despite this impediment, you can still protect your business from failing during the next recession. Here’s how.

Step 1 Review expenses

List all expenses and find ways to eliminate them or reduce them. Negotiate with staff to develop better flex-time work policies to reduce spending on paid breaks or benefits. Variable expenses especially should be decreased.

Step 2 Collect

Often times, cash flow becomes a problem when customers or other business do not pay you on time. The greater the length of time a receivable remains unpaid, the less chance that it will be paid ever. Be vigilant about collecting receivables to avoid having financial woes later.

Step 3 Watch inventory levels

If you do not have a just-in-time inventory plan in place, i.e. you are not located near your suppliers you need to be extremely careful not to have too much inventory. Locking up your cash in inventory means that amount of cash is unavailable and the inventory may not move, thus leaving you with a double loss. Monitor which products sell to determine the amount of inventory needed.

Step 4 Stock you shelves with high demand products

As an extension of step 3, once you determine which products sell faster than others, be sure to fill your shelves with only the high demand products. When you know what your consumers need and can figure out what there tastes are, supply those items and decrease or hold off on low selling products.

Step 5 Find local suppliers to sell on consignment

By arranging to sell items on consignment, you reduce or eliminate up front inventory expenses and can return products that do not sell back to the supplier. By finding local suppliers, you decrease the shipping costs significantly and help boost the local economy. This in turn leaves people near your store to be able to have the purchasing power, as they will be gainfully employed, to buy from you also.

Remember to reduce expenditures.

Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

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