J.D. Associates Retail POS Solutions Blog

Definition of Retail Success

  

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Question:  How can you tell if a retail business is successful or not?

Answer: You’ve got a slight fever…

Success is defined in many different ways and everyone wants to be successful. Many businesses define success as Gross Retail Sales.

For example, a single store that does 500K annually in sales could be very successful. It could also be on the brink of bankruptcy because expenses outweigh income. Let’s look at the 500K store:

Store: 500K
Assume Cost of Goods: 250K
Gross Profit: 250K
Expenses: (heat, rent, lights, payroll, etc.): 200K
Before Tax Profit: 50K 

This is not rocket science…

So where does the ‘slight fever’ come in? Many small businesses don’t plan properly to pay the bills and get caught up in overstock positions. Imagine that same store using the 50K to buy more inventory items – convinced that they will sell. Well, there’s no margin for error – or down sales because there’s no reserve cash. This is very often what small retail businesses do. Use profits to stock the floor – arguably to make more sales and thus more profits.

Many times, the net result is same sales, sleepless nights, and the owner going without a paycheck. That’s when the slight fever becomes a full-blown illness. What’s the prescription? Cash flow planning – everyone needs to pay attention to how the bills are going to get paid during normal retail cycles of good sales, and not so good sales.

Take two aspirins - don’t overbuy, and you won’t need to call me in the morning…

John Deery

john.deery@jdapos.com