3 steps to budget for retail profits

When store owners join a Retail-Mavens program, the initial call to action is focused on finances. Why?
First, because we know how important it is that you’re able to pay yourself and your team. But also, because as the captain of your retail ship, knowing your financial landscape is a nonnegotiable.

If numbers aren’t your love language, fear not. You can and should hire an expert to decipher your financial story. That’s precisely what we do, and if you’re ready to work with us, don’t hesitate to reach out. But let’s get down to the basics of your store’s budget. Ignoring overspending is not an option. I’m sharing three essential steps to guide you.

Step #1: Align expenses with sales. It’s an issue for almost every store owner. Inventory is usually your biggest expense. Aim to keep inventory costs between 48-50% of sales.

Next, our client gets a worksheet to figure out retail benchmarks for all other expenses like payroll, rent, utilities and more. Expenses, including profit, should never exceed sales.

Step #2: Increase margins for breathing room. The best way to give a budget more breathing room is to boost margins. Aim for an initial markup of at least 55%, with a challenge to reach closer to 60% as an average for the store. It’s a game-changer for financial stability.

"The bottom line is that expenses, including profit, should never exceed sales."

Step #3: Implement a cash flow management system like Profit First. Use this method to allocate a specific percentage of sales to profit, taxes, owner’s pay, inventory, operating expenses, and debt. This not only refines a budget but also reduces the stress of cash flow fluctuations.

Implementing Profit First is accessible for anyone, but for tailored insights, consider an assessment from a certified professional. Ideally someone like RetailMavens who can help you customize this process for your retail store.

Ready to take your numbers to the next level? Join my free class. I’ll guide you on calming cash flow chaos and using Profit First to create predictable profits.

Numbers might not be everyone’s love language, but they’re the language of a successful retail business. If you’re ready to navigate these waters with confidence, I’m here to guide you, while providing an exceptional experience to your customers.