Retailer or wholesaler? This is the advice your business needs…

Are you a retailer or wholesaler? Whether you are online in the ecommerce realm or have a bricks and mortar store the challenges faced are similar.  Perhaps you are in B2B (business to business) sales, or maybe B2C (business to consumer), you could be part of a very niched space like the healthcare equipment and supplies industry, or a home garden and tools supplier. The fact is, whatever industry you serve as a retailer or wholesaler the basic principles of good business behaviour are universal, and in this article, you will receive some valuable business tips on how to run a tight ship and maximise your profits.

There are many challenges for wholesalers and retailers at the moment including the pressure that interest rates are still playing in the economy (and according to top economists it looks like they will continue to do so well into next year), supply chain issues as well as a decline in customer spending but an increase in supply costs. According to a recent KPMG report, Quarter 3 of 2023 Producer Price Index recorded the highest rate of growth in production costs since the same quarter last year, while margins were impacted by a weakened Australian dollar and strong annual wage growth.  In this market retailers and wholesalers should priortitise customer retention rather than new customer acquisition (hello loyalty programmes!). 

One of the main pressure points for retailers and wholesalers that I encounter is managing inventory and in particular cash flow around it. This is particularly evident in seasonal businesses, such as Christmas suppliers, return-to-school products, confectionery suppliers at Easter etc… The trick is to manage your stock and your cash flow simultaneously and meticulously. Now, this isn’t meant to scare you or put you off, I have a tried and tested system that once implemented will change your life completely. Goodbye, sleepless nights worrying about where the secret stash of cash is going to come from to secure the stock you need… read on…

Let me introduce to you my secret weapon… Profit First. Profit First is the game-changing money management system of serial entrepreneur and author Mike Michalowicz. It challenges traditional accounting practices making profit the goal, and not the ‘bit left over’.

To implement Mike’s system correctly into your retail or wholesale business, you need to open up six (6) key bank accounts.

1. Income account (where all your money comes in)
2. Operating expenses account 
3. Owners pay account
4. Tax Account
5. Profit
6. Inventory / Materials / Subcontractors account

So, once these accounts are set up, any money that comes into your income account is then distributed to each other account according to a specific percentage that will work for your business. Read more about Target Allocated Percentages here, or give us a call and we can assist you in calculating the right percentages for your business.

Here is where the magic happens. Once you have started allocating money into these separate accounts you now have the money sitting there waiting for you. You know exactly how much is available for each business expense. This allows you to keep track of the inventory expenditure as well as to ensure that your pricing is correct. Another advantage of having your budget set out in varying accounts this may also open up opportunities to receive better pricing if paying upfront for goods, rather than on account for example. This puts you in the driver’s seat when negotiating better terms with your procurement. It also ensures that you are not chasing your tail when it comes to managing cash flow. 

As a mastery-level certified Profit First Professional, I know all the strategies you need to keep on top of your business finances, for seasonal businesses we may also recommend setting up a drip account. In theory, this is an extra account that we allocate money to in peak season, and then slowly drip-feed our expenses and inventory account as needed. This practice ensures that money is available to you when needed, and eliminates the temptation of spending money on unnecessary items.

If this sounds like the system you need to help your business to not only survive but to thrive, then book a discovery call with me today.