Profitability is the overall goal, no matter the season. However, in a retail offseason, cash flow can take a dip, even if your business is profitable. So, let’s not just aim for profitability; let’s manage cash flow intentionally during the busy season (which many of you are moving into now) and create a plan for the slower months. By being proactive about your cash flow you’ll relieve some of that pressure during the offseason and have more financial peace of mind year-round!
Offseason profitability
Let’s chat about the role of profitability in your offseason. Making a profit means having more money coming in than going out. When planning your cash flow for the year, it can be helpful to categorize your expenses into variable and invariable (fixed) expenses.
Invariable expenses, like rent and utilities, remain constant whether you’re in a busy or slow season. These costs are incurred regularly and are essential for the store’s basic operation.
"Let’s manage cash flow intentionally during the busy season and create a plan for the slower months."
On the other hand, variable expenses, such as cost of goods sold, supplies and payroll, fluctuate with activity. As sales increase or decrease, variable expenses will follow suit.
To become profitable, you’ll need to optimize both types of expenses to make sure you’re not paying more than you absolutely need to.
Offseason cash flow
When managing cash flow, having a plan is key. Use a cash flow projection to map out your year month by month. This will ensure that you know exactly what to do with extra cash during busy months. A projection will show you where in your year the extra cash is needed. Move that extra cash into a separate account and keep it as a buffer to help mitigate negative cash flow during slower periods.
The best cash management system I’ve found is Profit First. This process gives every dollar a job, giving you peace of mind during those offseason months or times of year when expenses rise — like tax time. However, store owners need to tweak this method to suit their unique financial needs.
Inside our Profit First powered by RETAILMavens program, we help store owners tailor this method to work its magic on their finances. If you’re tired of running an “nonprofit” business, reach out!
