Did you know that locally-owned small retailers can earn 50% or more of their total annual sales during the critical holiday shopping period between Black Friday and New Year’s Day? Clearly, the choices you make during this time can have a big impact on cash flow for an entire 12 months.
So what can you do now to plan a successful holiday season and avoid any cash flow surprises?
The SBA has identified six common pitfalls that can impact small business cash flow and sales during this key period. Read on to learn more and get our take on how you can overcome them:
Lack of inventory control – Unsold inventory can eat into your cash flow in no time. September and October are not the times to place huge orders or over-order, instead make small, regular orders so that you maintain a solid baseline of stock (particularly higher margin items) without a lot of cash outlay. If you want to get really savvy about it, do a physical inventory now.
You could also use business intelligence tools or your POS to analyze past sales and the inventory you needed to meet that demand on a monthly basis. Read more about how you can free up cash flow with the help of business analytics.
Hiring the wrong employees for critical positions – Ouch, we’ve all done it, realizing too late that our new hires aren’t up to snuff. It’s a problem that plagues small businesses because their management structure is light and they need to be able to rely on staff to operate well without a lot of supervision. Spend some time now planning your staffing needs. Check out our tips for nailing your job description and useful sources to help you find the right candidates.
Undercapitalization – Say what? Basically do everything you can now to free up cash flow so that you have enough funding to pay those new hires, pay your bills, and fund inventory through the holiday season. This applies to all businesses, retail or otherwise. Don’t forget to plan ahead so that you have a clear view of your cash flow predicament. Your cash flow forecast and cash flow statement can help.
Then…diligently manage your accounts receivables, take on board the inventory advice mentioned above, and max out your accounts payable so that you’re paying bills nearer the due date or taking advantage of grace periods.
Not embracing online sales and social media – According to e-commerce solutions provider, Bigcommerce, small and medium-sized online sales saw a 27% increase year-over-year between Thanksgiving and Cyber Monday in 2014. With online sales expected to keep rising, make sure your website is optimized for retail sales (even if it’s just to order a gift card). Don’t forget to use social media to showcase your holiday promotions, secret sales, pop-up sales, high-inventoried merchandise, events, new dishes, or menus.
Not delaying the employee office party and social events – Consider delaying your staff holiday party until the New Year. Not only will you avoid inflated holiday rates, you’ll also steer clear of the distractions that parties create – everything from planning the event to getting over the inevitable hangover is a distraction that you and your staff don’t need right now.
Innovation and creativity lost – In order to compete with the big box stores who flood the market with steep discounts on big ticket items, small businesses should look to deliver on and market their unique value at this time – customer service, the personal touch, creative and innovative goods not found elsewhere, and so on. Partner with other small businesses to champion your shopping district and take advantage of Small Business Saturday (November 28) to create some buzz.