Tag: expenses

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Pandemic Profits

pandemic

It’s been 30 months since the pandemic began. How does your business stack up? If your business benefitted from the side-effects of stay-at-home mandates, know that an increase of sales doesn’t equate to an increase of profits. Read on to determine if your increase in sales actually equated to a better business operation.

Gross margin percentage

The first place to start is your gross margin. The gross margin is listed as a percentage on your income statement. Look back for every year back to 2018. How has it changed?

To determine why these changes occurred, go to profitsplus.org and use the free “logical profit and loss statement” calculator. Expenses are grouped by category including advertising, payroll, operating expenses, etc. Compare these expenses to your percentage of sales.

If the past 30 months really has made you a better business operator, your gross margin percentage should have remained the same or even increased since pre-pandemic years. Business owners who equate in increase in sales to an increase in profits aren’t seeing the full picture.

Pandemic prices

Another thing to keep in mind is the increase in product price. Do you increase price on the sales floor when new product comes in at a higher price? If you’re selling inventory based on what you paid, you might want to reconsider. Remember, your cost of operating has increased just as the cost of inventory has increased also.

Inspiration for this post came from “Growing Beyond the Pandemic” by Tom Shay published in the August 2022 issues of American Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.

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Profit First Cash Management

profit first cash management

At the end of the day, profit is how we’re able to run a business. If at the end of the year, year after year, you’re unhappy with the profit you’re seeing, something has to change.

Enter profit first cash management. What does this mean? Essentially, Profit = Sales — Expenses. Simple right? What if we switched this equation around to account for human behavior. In other words, what if it looked like this:

Sales — Profit = Expenses.

Game changing, right?

What is Profit First?

What do we mean by profit first? Profit first teaches you to take the profit first then use the remainder to run the business. Essentially what we’re putting into practice the time-tested adage “pay yourself first.” The first step to get started is to complete the profit assessment, which you can find here.

If you’re beating yourself up for the numbers you see after completing the assessment, you’re not alone. Thankfully, this is just the starting point.

Open Your Accounts

Now that you know where your finances stand, it’s time to set up your bank accounts. The five foundational accounts include:

  • Income
  • Profit
  • Owner’s compensation
  • Tax
  • Operating expenses

And it’s recommended quilt shops should open an inventory purchases account also.

Another way to do this is to open a profit account, then transfer 1% of each sale into that account. If your business runs on $1000 / month, it can survive on $990 / month. Although this feels like nothing, you’ve started a habit that will grow month over month and change your business habits forever.

Inspiration for this post came from “Overcome Financial Stress” by Jacob Curtis published in the October 2021 issue of American Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.

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Know Your Break-Even Point

break-even point

Knowing your break-even point helps you to plan for the long-term. Plus, the more data you have, the better you can run your business. Check out the below to find out just how much it costs for you to keep your doors open.

Determining your break-even point

A break-even point tells how many sales you need to cover expenses (or where it breaks even for a given period). By knowing your break-even point, you can determine how viable your quilt shop is, and if it’s getting weaker or stronger.

The equation for calculating your break-even point (or really when your revenue equals $0 profit) is:

  • Revenue = Cost of inventory (goods) sold + Other expenses + Profit
  • For the equation:
    • Revenue = Sale price per unit x Number of units sold.
    • Cost of inventory (goods) sold = Cost of inventory per unit x Number of units sold (keywords are inventory and sold. Not what’s sitting on your shelves).
    • Other expenses = Sum of all non-variable expenses (or rent, utilities, payroll, insurance, taxes, etc.)

For break-even purposes, profit is $0. If you want a margin of safety, simply chose the number you want as a net and plug that into the equation.

Determining daily business costs

Once you figure out what your break-even point is, you can determine how much it costs to operate per day.

Most quilt shops separate this into two categories: fixed expenses per day and variable expenses per day. Some of these expenses include payroll, rent, utilities, and more. Knowing all of these equations will help you make smarter buying and selling decisions.

Inspiration for this post came from “Know Your Break-Even Point” by Jacob Curtis published in the June 2021 issue of American Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.

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Decrease Your Expenses

Cut Expenses

One of the ways you can make more money is to decrease your expenses. Check out some of the questions to ask yourself below.

Questions to ask

Make a list of all the expenses you make on your business credit card and separate them into categories. Evaluate which expenses you should keep, and if you’re struggling, these questions should help.

  • Is this a service or product that I am utilizing every month?
  • Does an annual subscription make more sense? Often times, annual subscriptions save two months of the cost.
  • Does it make sense to pay for this level of service? Look into free or cheaper alternatives.
  • Can I cancel the service? Do I use it anymore?

Other ways to cut expenses

If you justify some expenses by saying “it’s only $25 a month!” remember that comes out to $300 a year.

One way to cut expenses is by salaries. We all agree employees should be paid living wages with appropriate benefits, but are your staffing assumptions based on old data? As business models change, some skill sets can be adjusted or moved to better fit your customer’s buying behavior.

Another way is through rent. Rent is likely the highest expense your business currently makes. How much do you earn per square foot? Can another smaller location fill your business’s needs? If customers are paying for parking, moving to a place that allows for free parking is a great idea as well.

Inspiration for this post came from “Make More Money,” by Gwen Bortner published in the June 2021 issue of American Quilt Retailer.

If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.