Market Update
We are so sick and tired of this cold! The chilly streets of the Northeast just might be colder then the record low national retail sales, leaving us frostbitten physically and financially. While the media cries wolf, the government continues to increase national debt, the consumer continues to hide.
This month we are looking to snuggle up with our loved ones and get warm. Well, here is your first wave of warm air. It is not as bad as it seems. National consumer confidence is at record low, but that reaction is a result of the national media. You put enough pessimists on one channel and it creates a following of pessimists. Why is it always easier to be scared and cynical rather than proactive and optimistic?
We’re not psychologists here so we won’t attempt to answer that, but we know if we quit crying wolf, the people in town will not panic. It is true, we are facing difficult times and this is a recession. However, we survived 1982 and 2001, where the country was as bad or worse in GDP growth (by the way look at figures yourself, don’t let the media skew them for you). We survived then, and we can do it again. We’re smarter, stronger, and more united. This is the perfect time to look at our business, our industries and be trendsetters.
Management specialist Jim Collins was recently interviewed by Fortune, stating “As a rock climber, the one thing you learn is that those who panic, die on the mountain.” So don’t fear, the future is bright and warm.
Your Business
The banks are finally thawing after the cold shock, melting their grip on loans and financing, which is so very important today. Rather then financing your business on credit, what is more important is your Cash Flow. Very few of us want to worry about cash flow and focus on financial statements, that is why the first professional help we hire is an accountant. We conduct our business because that is what we do best, and then worry about finances. The majority of small businesses I’ve worked with have a common problem: Make sales, pay bills, take home the profits. While this sounds like plan for success, it leaves a large gap for vulnerability.
Very often we focus on our sales and profits, both of which are found in our Profit/Hopefully-Not-A-Loss statement. There we analyze how much we spent, how much we sold and what we’ve made. However, the more important part of our finances is our cash position. The high life of entrepreneurship is working for yourself, however unlike our friends who work for others, we cannot rely on each week’s check. While working for others we are sure that each payroll period our check will clear, and we will have cash in our possession. When we work for ourselves, we know that a sale doesn’t always mean cash.
For example:
Your monthly sales average $10,000 a month, while your expenses are $7,000, and you’re doing okay. This month you decide to give your customers a chance to pay their bill in 45 days, rather than 30. This works great, your helping them out in tough times, while increasing sales up to $11,000. 10% awesome. Yet, now you are having a cash problem. While the sale was made, you did not receive the cash just yet, meanwhile your bills are due. So you still owe your $7,000 dollars to employees, the electric company and your vendors, and now you are digging into your own pocket to pay the bills.
Thus, while your sales increased and your customers are happy, you might not be able to keep you business afloat for long. This model will hurt further more when one of your customers goes out of business (something that many of us experienced recently), or if you are planning to expand. Basically, managing your cash flow is as important, if not more, as managing your checking account. So watch that cash. Cash is King.
Our friends at Cathedral Consulting Group offer a more extensive lesson on Cash Flow Management, and Small Business How 2 also offers great classes.
Tulipia and You
This is where we come in to help. While Tulipia Bridal does not offer extensions on bills regularly (we try to live what we preach), we allow all of our wedding gown retailers an opportunity to manage their cash flow. Regardless of the wedding gown payment models you set up for your brides, we protect your margins on the gowns through strategic pricing (see more in our article on Margins or contact us for details). Furthermore, our service and delivery of wedding and evening gowns, allows you to keep your inventory to the minimum, with faster turnover, leaving your bride more time to plan her perfect day, while you protect your cash flow.
Release 4 - Keeping Warm.pdf (2.32 mb)
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