FOR THE LAST two to three years, we retailers were unusually busy and profitable. We couldn’t help but make money despite ourselves. But like the old saying goes, nothing good lasts forever.
The world we live in is constantly changing and evolving, some for the better and some for the worse. Political turmoil and rampant inflation are everywhere, both here and abroad, and this weights negatively on consumer confidence. Recent numbers support this downward trend, and unfortunately, when it comes to the consumer and their discretionary dollars, perception is always reality.
There is no doubt that your business will slow down eventually if it hasn’t already, and you should be prepared for the new retail reality when it happens. Here are three strategies you should put in place in case you ever need them.
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1. Have a business line of credit. I realize that with the prime rate at 8.5%, the cost of borrowing money is high. I’m suggesting you have an unused line of credit available to you in case of emergency. My company has one, and it only costs $99 a year to control six figures of capital. If your company is on solid financial footing, now is the time to set it up. The old saying is true more than ever: The best time to borrow money from a bank is when you don’t need it.
2. Have a plan to cut your operating expenses if you need to. Nobody likes cost cutting, and when times are good, you never give them a second thought, but it’s important to have an internal strategy in place should you need to implement it immediately. Look at all your expenses and figure out where you could trim the fat and still operate successfully. It’s amazing how much money you can save monthly on things you won’t even miss. That $3,000 a year we were spending on fresh flowers could immediately go to the bottom line.
3. Melt the next tier of your inventory for cash flow. With gold hitting record highs this year, if you’re like me, you have been melting some of your old inventory and previous buying mistakes, but you need to go further than that. We set up a spreadsheet of inventory that survived the first round of melting. This so-called “second tier” of inventory (that we also will probably never sell) is broken down by department and is available to be melted immediately should we ever need overnight cash. When you look at how much money is available to you, it’s quite sobering and should be a large part of your emergency backup plan.
In business and in life, it’s critical to always have a backup plan.
