Hmm. Concentrating on profits is easier said than done in today's environment, with cost increases proliferating under the umbrella of inflation.
- Workers are able to "shop around" for higher wages and benefits.
- Shipping costs are increasing.
- Fees for online services are increasing.
- Transaction costs, from listings to advertising to warehousing to fulfillment for e-commerce services are increasing.
It can be a dismal picture, particularly for those focused only on their profit and loss statement.
What's the key for weathering economic downturns? First, don't let the headlines overtake the reality. That is, ominous news always gets more visibility than good news. A steady diet of bad news – or frequent recitation of factors beyond any one person's control – can wear down the most optimistic of us.
But the real key is remembering this truism: In a down time, whether just your business or the economy as a whole, when you must choose between profits and cash, choose cash. Remember that; cash is king.
As you know, for retailers, their cash is tied up in their inventory more than anything else. And, compared to all the other forces that are impacting their business – sales, labor costs, operating expenses, rents, etc – your inventory is actually something you can manage.
- How best to manage that inventory? With the power of GMROI. (Go here for why and how.) It improves cash flow.
What else to focus on in these uncertain times? Nurturing your entire business network, particularly those you really want to continue to do business with.
- This too is within your control. What are you doing to nurture and sustain those folks? Whether it's your customers, employees (your most valuable asset), suppliers, bankers, neighboring businesses, trade groups, etc, reach out to them.
- Show them some loyalty. Share some ways to help one another. After all, we are all in this together.
But, remember: controlling your cash flow is the best way to get through this period of uncertainty.