Editor’s note: This article originally ran on YourSourceNews.com and is reprinted with permission.
Nothing holds a business back like cash flow problems.
And it’s even more true for small businesses.
In tight times, larger companies may have credit, funding and enough cash flow to keep the lights on. But small businesses are often more challenged. If one month or even one week has unexpectedly slow sales, you may find yourself struggling to cover your bills.
Small business owners may give up their own salaries to pay their employees, vendors and overhead. And sadly, some small businesses fail because they run out of funds.
What could you do to prevent this at your store?
1. Be aware of your gross profit margin.
- You might experience cash flow problems if your gross profit margin is under 20%
- Gross margins of less than 30% can be dangerous for businesses with high gross costs.
- Good gross profit margin is around 30–35% on average
- Look at each type of item you sell; a gross profit margin of over 50% is healthy for most businesses
2. Could you focus on selling more products with 35% or more gross profit margin?
- You’re investing your time, money and effort in selling something
- Could you focus on higher profit-margin offers that people in your trade area are buying? It’s the same amount of time for you
- Stop and look around at what people in your trade area are buying. What could you offer that has 35% or more gross profit margin?
- I’m not saying to jump into it like it’s the next shiny object. I’m suggesting you simply consider this question and become aware of any possibilities.
3. Can you increase sales volume on your higher gross profit products or services?
This can be accomplished by:
- Bundling products and/or services to create irresistible offers
- Offering easy payment terms like payment options for less than perfect credit, generating new customers and sales
- Increasing organic social media reach through video shorts, personal branding, local promotional partners and local influencer marketing
4. Consider if it makes sense for you to offer products or services with gross profit margins below 20%.
When would it make sense?
- If it is a loss leader that creates additional sales for higher profit products or services
- If your customers expect you to carry the item and would buy from your competitor if you don’t have it in stock.
5. Prioritize consistent contact with your current and potential customers.
Are you e-mailing your customers and prospective customers? E-mailing twice a month is minimal, twice a week is reasonable and at least once a week is a necessary level of contact.
What could you write about? Answer the most common consumer questions, one topic per e-mail. It needn’t be long, but should be valuable to your customers and prospects.
- Avoid only sending pitches and offers, but do include a call-to-action or special promotion
- When you’ve gathered two to three months of question-and-answer e-mails, you can begin cycling them, starting with the first one you sent.
- Stay top-of-mind by creating your in-house email list and consistently e-mailing your contacts.
This article originally ran on YourSource News and is reprinted with permission. You can view the original article and other stories here.
About the Author
Joseph A. Stepke, aka “Joe the Finance Guy,” is a sales manager and brand ambassador for Acima Leasing, a provider of lease-to-own solutions for retailers. Contact Joe at (615) 775-1597 or joseph.stepke@gmail.com to learn more ways to grow your sales.
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