As in everything that happens in this universe, there are good times and there are bad times. Newton’s law that said, “what goes up must come down” is indeed the ultimate truth. So when our business slows down to almost a standstill point, what do we do?
Consolidation
Consolidating does not apply to businesses that are well diversified. For a small time retailer like me, when business goes down the drain, we can also consolidate. When times were good, like all retailers, we tend to stock up. Stocking up is a good for retailers because when there is a price hike, we stand to make more by selling the old stocks at a the new price. However, when things are not so rosy than before, we should stop this practise of overstocking.
Make a note of all the better selling items, check back to your records and see how many of those you can sell in a normal day. Then you should have a rough idea on how many of these items you can have in stock.
Only stock on the essential items
Essential items like those that you have buyers for everyday are the things that should have ample stocks. Items that only sells one or two per month can be held up, even after you run out of stock, because the most you will be loosing will be maybe one or two sales per month. Those can be supplemented the following month when your essential items are enough to last you for the month.
Be Disciplined
You don’t have to feel bad when a customer walks in and you have to tell them that you have ran out of stock for certain items. Be honest and tell them it will only be available next month. Never start picking up your phone and start ordering away whenever someone ask for something that you don’t have. Most of the time, by the time your goods arrive, they would have bought it somewhere else and you will be stuck with goods that might take months to dispose.
Sales verses purchases.
You sales should coincide with your purchases when times are bad. If you buy more than you sell, when the time comes for you to pay for your purchases, you will feel the pinch because you haven’t made enough from your sales to cover you purchases. Then you will have to dig into your reserves to pay, which is not a very good sign. Your reserves are for real emergency cases. If you are to keep digging into it, one day it is going to dry up. The idea is, if your total sales is 30k per month because of the slowdown, make sure you don’t exceed 15k in your purchases. This way, you will have an easier time coping.
space out your purchases.
You don’t necessary have to have an empty shop if you stop buying so much. If, when times are good, you tend to stock 2 dozen of everything on any given month, you can now stock one dozen. That way, you shop will still be well stock on all items albeit a little bit less. Make it a point not to order anymore for that month even if the items runs out. Replenish that item next month. Do this to all your items and you shall see your accounts payable slash by half in 3 months time. At least this will give you some breathing space.
Other Savings
Do you have 2 phone lines, one for your fax machine and one for the phone? Terminating one line won’t hurt your business very much. Use only one line for your Fax and Phone. What about Electricity? maybe you don’t have to sit in your Air Con office 8 hours a day. How many workers do you have? When times are slow, I bet your shop won’t need to have so many. Might sounds cruel to terminate one or two, but that’s survival. If you close shop, everyone will be out of a job. Driving a big fanciful car? Why not trade in for a cheaper version. You save hundreds in installment payments, not to mention taxes and insurances. There is nothing to be ashamed of.
Sacrificing all these luxuries earned when things were good will ensure your business’s survival. These can be bought back when things picks up again.