Business Financial Planning: Counting Every Penny is Crucial
Knowing where every penny goes — and carefully planning for economic tough times — can be the difference between success and failure in any business. Take the example of a small specialty clothing store in St. Louis. When the recession hit, sales began to slip. Fortunately, the store’s owner was tracking sales month by month and saw trouble ahead early on.
By the end of 2007, sales were down 15 percent from the year before. By the end of 2008, they had slid another 20 percent. There were no signs on the horizon that the future was going to any rosier, which meant even tighter times for the small business.
Long before then, the company owner had begun taking action. At the end of 2007, when her lease came up, the owner sat down and talked to the building’s owner, explaining that she would have to leave unless he was willing to negotiate a more attractive lease. Because they had a good relationship going back almost ten years, he agreed.
She took advantage of other ways to cut costs, including installing energy-saving light bulbs in the shop and letting one of her part-time salespeople go. She also took a close look at what customers were buying and phased out products that weren’t selling. Finally, she started sending out a monthly e-mail to her most loyal customers, updating them on the latest products and offering discount incentives to get them into the store.
If I hadn’t been keeping very close track of our balance sheet and making very cautious predictions about the future, I would have had to close the doors months ago, the owner told us. I know plenty of business owners who weren’t tracking their numbers and were taken by surprise. Many of them have already hung up their going-out-of-business signs.