Cathy Donovan Wagner, founder and CEO of the consulting firm RETAILMavens, kicked off the January 2023 Coastal Connections Conference with a Keynote session titled, “The Fastest Path to Cash and Calm, Increase Cash Flow Now.” Speaking to a crowd of coastally located retailers, Wagner gave a highly informative talk on the ways in which a seaside retailer could increase cash flow. “Small changes can have big results,” she told the gathering.
The consultant began by telling the attendees to pat themselves on the back for simply being at the conference. Wagner and then told the group to “Be patient. Success takes time, it is not an overnight thing.”
The speaker then explained the relationship between cash flow versus profit, pointing out that a business can be profitable but still not have much cash flow. “Cash flow is the money that flows in and out of a store, and profit is what's left over after expenses are deducted. They don't always match up. We should be more interested in cash flow than income,” she told attendees.
Wagner then showed slides reexamining the old formula that says an item’s initial markup (IMU) should equal 50% of the charged price for it. She gave the following example: Store One takes a 50% IMU which results in a gross of $500,000. But Store Two takes a 55% IMU — and that 5% increase results in a gross of $555,555 in retail dollars. “Numbers don’t lie,” she said, then showed a slide with the new IMU formula: cost divided by 0.45 equals price, saying, “The old 50/50 formula doesn't work anymore.”
She then outlined seven steps to improving cash flow:
- Open up a sales tax account.
- Group operational bills together to be paid on regular dates such as the first, 15th and 20th of each month.
- Call you credit card company and change the due date to one that works better for you.
- Manage cash consistently.
- Check credit card interest rates regularly.
- Check credit card processing fees.
- If you can't pay, call your vendor and work something out.
On that last point, Wagner emphasized that should you find yourself short of cash to pay a vendor, the worst thing you can do is just ignore the problem. “Look at it as an opportunity,” she said. “Talk to your vendors. Find ways in which you can partner with them. That’s more important now than it ever has been.”
She pointed out that a lot of vendors will offer terms that are more favorable than the credit card companies do.
She encouraged retailers to set aside time every Monday to focus on finances, calling them Money Mondays.
Wagner concluded by telling the attendees to “look for new ways to serve your customers” and to “celebrate ‘Money Mondays.’ And most of all, remember that you are not your numbers.”
The Coastal Connections Conference was held Jan. 22-24 at the Margaritaville Resort in Orlando, Florida. Dates for the next edition will be announced soon. Visit www.coastalconnectionsconference.com, to learn more.
