3 simple tweaks for cash flow improvement |
By Dan Jablons |
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Keep your business afloat with these simple strategies for improving cash flow.![]() It’s no secret that 2025 has come with its share of surprises and challenges. So many retailers, and businesses in general, are trying to navigate tariffs, tax increases, neighborhood changes, inflation, reduced traffic, and many other obstacles that seem to diminish cash flow. Now, more than ever, finding the best tools and techniques to maximize cash flow has to be a priority. Tweak #1: Adjusting your selling cost.Most retail businesses operate on some form of base plus commission. This is an area that I find to be implemented poorly in many businesses. Many stores pay commissions on the first dollar sold (they should not be, the sales people should be required to hit a goal) and are not planned in such a way as to keep the cost of sales in line. Let’s tweak that and see the results.Now, what if you put in a commission plan that keeps the sales at a good percentage, such as 9%? Try this — take the hourly wage for your employee and divide it by 0.09. That number is the employee’s hourly goal. For example, if you have an employee that is paid $10 per hour, divide $10 by 0.09 and you would get $111.00. That is what that employee has to sell each hour. Tweak #2 – Lowering your purchases.We took a store and found ways to lower their inventory purchases by 2%. Look at the results in the chart on this page.This was done systematically, using all the tools of open-to-buy planning. Our overall goal was to cut purchases by 2%, but we had to figure out precisely how and where. If you aren’t using an open-to-buy plan to do this, investigate getting one. Tweak #3 – Adjusting your Markdowns.Let me start this section by saying that there is no such thing as a “perfect buyer” and my retail customers have often heard me say that buying is the toughest job in the store. Having said that, there are some strategies we can use to reduce or limit the markdowns.Markdowns are usually caused by the following: receipt of late goods, overbuying, inadequate department structure, bad forecasting, bad buying, overly broad assortment, bad performance on the sales floor and not reacting to early poor sellers. ConclusionBy implementing all three tweaks, we get the following increase in cash:
We produced $37,500 on a $750,000 business. And it didn’t come from a crazy new marketing idea, a revolutionary new line, or a magical new salesperson. It came from watching the numbers, not only based upon what happened but what we planned to happen and working with the buyers, the vendors and the store managers. Through Retail Smart Guys, Dan Jablons helps independent retailers in 18 countries create great cash flow through planning. He can be reached at dan@retailsmartguys.com. |