3 Strategies for Maintaining Your Retail Business Budget
In business, the bottom line is called the bottom line for a reason. The success or failure of a business is very much a product of the smart management or lack thereof) of that company’s budget. Every budget has the same simple purpose in theory, which is to keep track of expenses versus income. Of course, the minutiae of actually tallying those numbers and utilizing the information gleaned is anything but straightforward. For retail businesses especially, that bottom line can be a very thin one indeed as the cost of merchandise versus total sales can become a precarious balance to strike in addition to dealing with the costs common to most businesses, such as employee pay and (for brick and mortar stores) the upkeep of the property itself. Here are three tips for successfully maintaining and balancing the budget of your retail business.
Get Your Budget Organized
The sheer amount of information required in an accurate budget can be daunting at first, so keeping all of those line items codified and organized is key. Breaking down expenses into variables (such as labor), semi-fixed (like advertising) and fixed (rent, staff, etc.) costs is a good beginning. A major advancement in the art of doing business budgets has been the availability of digital tools like spreadsheets that can calculate revenue and expenditure automatically and accurately. This is one area of office work that absolutely should be computerized at least as a backup. A properly saved computerized spreadsheet won’t get misplaced or destroyed. Most importantly, it will almost always be more accurate and less prone to tampering than a physically written budget. Remember, a budget should be every month if possible. If discrepancies or shortfalls are caught early enough, you might be able to head off a problem before it becomes a disaster.
Learn to Predict the Future
Nobody expects a business owner to be a bona fide psychic. That being said, a part of developing a budget for your business is estimating what costs and revenues are likely to be in both the near and far future. Unfortunately, in the retail world especially there are difficulties inherent in predicting both of these things. The price of merchandise changes over time due to market forces, and even buying in bulk is no guarantee of price consistency. The attitudes and desires of customers are hard to predict as well, and a retail owner needs to have a finger on the pulse of culture to make predictions about this. A Dun & Bradstreet report showed that only 47% of retail startups were still in business four years after their launch, and this was due in large part to frugal customers holding back spending in a volatile economy. Try not to have lofty expectations that the market might not be able to support.
Take Advantage of Tax Deductions
A wide array of tax breaks and deductions are available to businesses and can help in offsetting some of the costs involved. The problem is that many business owners who are just starting out as entrepreneurs have little idea of the breadth of these potential incentives. How many owners of a home-based retail startup are aware that employee pay is a possible write-off? How many would consider that energy tax incentives could be utilized to make an upgrade to some obsolete, money-wasting system? These exact codes often vary by state and municipality and some areas even enact what are termed “Qualified Opportunity Zones” in distressed communities where special tax deferments may apply. Remember to keep these savings in mind when calculating the cost of doing business.
Business leaders can’t make wise decisions without having all the information. Oftentimes, there’s actually an information overload in the business world. It’s keeping track of that information and leveraging it to make wise future choices that remains the challenge for business owners. By remembering a few key fundamentals of budget organization and putting them to work, you can help to keep your business afloat in good times and challenging ones.
