February 8, 2023 By Suzanne Robertson

Small retail business owners are understandably on edge heading into Q2 2023. However, the post-pandemic economy has not had the expected negative effect on American small businesses.

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Data shows:

  • The holiday season was better than expected. The strategy to offer deeper discounts to combat inflation worked. Consumers showed up and spent their hard-earned income with small businesses.
  • According to Adobe® Analytics, consumers spent $211.7 billion online over the 2022 holiday season, a 3.5% increase over 2021.
  • New business applications in 2022 were up 44% from 2019, reports the U.S. Census Bureau.

Here’s some information on how those running a retail business may keep their foot on the gas in the new economic normal.

Foundations of a successful retail business

The basic foundations of a successful retail business are generally summed up by the four Ps: product, price, place, and promotion. Even if you’ve nailed all of these elements, Investopedia reports® that running out of money is typically a small business’s biggest risk. Entrepreneurs often know what funds are needed day-to-day but may be unclear about how much revenue is being generated. This disconnect may be problematic.

The solution? Experts suggest putting cash flow management before profits. Read on to learn more about this important financial metric.

Cash flow and why it’s important

Cash flow is simply the amount of money that goes in and out of your business. Some reasons you may want to manage your cash flow effectively include:

Making better plans

When you work off of an accurate cash flow statement, you'll better know where you stand financially. Retailers who are on top of cash flow put themselves in a better position to avoid making impulsive decisions that may put their business at risk.

Understanding where the money is going

A profit and loss statement is an important tool. However, it often doesn't tell the whole story. Cash flow may help fill in the gaps. It's vital to understand where money is being spent and why it's being allocated that way. This helps make it easier to identify where you can cut costs, if needed.

Staying on top of vendor costs

If you're having cash flow problems, you may not have funds available to pay vendors and suppliers. Cash flow planning may help you avoid a stack of unpaid invoices or a hit to your reputation.

Expanding effectively

Growth requires cash. Offering new products, opening a new location, hiring employees, and purchasing equipment can be exciting, but if you don't have the cash flow to support growth goals, you may end up facing financial issues. When you manage cash flow correctly, you'll better know when the time is right to make a leap.

How to improve cash flow

Once you’ve created a solid system to track cash flow, you may find yourself overwhelmed. But try to remain calm! There are a few solid strategies retailers may be able to put into place to help increase and stabilize cash flow. Explore the steps below to help get on the right track.

  • Invoice regularly. Plan how payments will affect cash flow so customers and vendors won’t be surprised when a bill is due. When you invoice regularly, you’re more likely to receive payments on time.
  • Collect receivables. Is your income dependent on paid invoices? Uncollected invoices are a surefire path to cash flow problems. Commit yourself now to pursuing payment for all overdue invoices.
  • Increase sales. Our article, 10 Tips to Increase Sales for Your Small Business, provides actionable strategies you may want to consider to help your business increase sales to current customers and attract new ones.
  • Offer price discounts. Discounts typically mean that you’ll have less cash overall, but offering small discounts may prove helpful in some situations, especially in a down economy.
  • Secure a low-cost loan. Although this might sound counter intuitive, outside funding may help with cash flow and provide valuable working capital. Funds can typically be used for a number of business-building initiatives to boost sales and might even be used for refinancing expensive debt.

Secure flexible funding

Applying for outside funding may sound intimidating. However, if you work with the right lender, you may be able to secure the best financing option for your unique business.

The SmartBiz team recently worked with Glampin' Life LLC®, a family-owned outdoor lifestyle brand based in South Carolina. The business manufactures and sells direct-to-consumer beach products. Owner Mike Mayleben came to SmartBiz looking for a way to stabilize cash flow and grow his business. He ultimately secured a low-cost SBA loan from a SmartBiz network bank, shoring up cash flow and funding growth initiatives.

Mayleben posted a 5-star TrustPilot® review about his experience with SmartBiz:

"Fantastic experience! The entire team that I worked with, specifically Pamela, did a FIRST CLASS job. Communication was on point, I was in the loop every step of the way. Glad I chose SmartBiz Loans® for our SBA needs."

If you’ve determined that it’s time for outside funding, SmartBiz can help. The banks in our network offer:

  • SBA 7(a) loans are usually the most highly sought-after. Their minimum loan amount is $30,000, and the maximum loan amount is $5,000,000. You can use proceeds for working capital and debt refinancing.
  • Bank term loans typically offer the opportunity to secure cash flow more quickly while locking in a favorable fixed rate. Bank term loans come with additional flexibility in how you use the funds.
  • Business lines of credit may be great for sudden expenses, cash-flow needs, or major purchases. A line of credit gives you quick, easy access to the funds you need. You only pay for what you use* and the low monthly payments give you flexibility to invest in new opportunities and focus on running your business.

* Loan amount subject to credit approval. Paying the minimum interest-only monthly payments will not repay the principal that is outstanding on your line. The Bank makes final approval decisions, originates, and services all loans. Additional restrictions, limitations, and exclusions may apply.

Final thoughts

If you’re ready to explore funding options, SmartBiz may be able to help you find the right fit tailored to your needs. Pre-qualify in 5 minutes without any impact on your credit score.*

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