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Thread: analyze my finances please!

  1. #1

    Default analyze my finances please!

    I opened my store almost a year and 10 months ago. I cater to early development and special needs. I took a business loan but have since racked up some credit card debt to make sure I always have enough inventory. I carry 60-70 different companies and am on prepaid terms with all but 1. My sales over the past year have not being covering overhead and now I'm running out of cash and every month is becoming a bit of a game to make sure I have enough for each bill. It's getting bad and I'm not sure what the right thing to do is. I've tried to cut other costs but there's not much to cut. I also run and manage my business completely alone (while being a mom of three). I started looking into debt consolidation, other loans,etc. but it seems to not be possible with the low sales. Here are some details, hoping someone can help suggest something.

    Rent 1957 (going up 3% in oct)
    Gas & Elec- up to 150
    Verizon - 159 (hoping to get a better deal with spectrum in a couple months when contract is up)
    insurance - approx 128 paid over 7 months (start again in Sept)
    Garbage collection - 43.55
    Merchant account fees (based on percentage of sales btwn 40-80)
    Website - around 340 in December (I barely push the website because I feel like I lose money when I make a sale with higher shipping costs)
    Loan payment 544
    credit card minimums 608 & 80
    Annual sales tax approx 2400, 150 for a permit for AC, account fee 650-700

    Loan balance approx 36k,
    credit card 1- 27,467 (interest comes to approx 330)
    credit card 2- 8,127 (0% until Oct 2, 2017)
    Monthly reoccurring payments set to credit card:
    shopkeep - 79(just went up to this)
    ADT- 63.25

    Now for Income:
    Net sales from aug '16-july '17: 29073
    Tax return: 10,000
    Rental Income (charge 15/hr for basement space for groups): 1881

    My cash balance is dangerously low, maybe a couple thousand so I rely on sales now to pay for the next bill.
    My inventory is pretty high - Almost 20k value (between 70-100% mark up -although shipping costs kill me)

    I started doing activities and charging a small fee (so far I probably just made what I spent). I have some free activities that often generate sales but its difficult to run when I'm alone so I usually as the woman who rents to help me work the event and I dont charge her rent for a day. I also try to have sales but it doesnt often bring in too many people although my most recent did because I put on the ad they must mention it so I can track it and I did get a few people for it. As far as advertising, I paid monthly my first year for the local parent magazine and it was so expensive,I would ask all my customers how they learned about me and it was usually word of mouth. We have flyers in centers and schools and I plan to print more soon and have my mom deliver to ever pediatrician office and businesses with the same market. I often attend fairs with just an information table and maybe activities. One issue I have had is my schedule, as mentioned I'm a mom of 3 (One I had in January so I actually took a 10 day maternity to have a csection) but I noticed my busy hours are between 12-2 so my schedule has been 11-5 with slighty shorter on the weekend. It's very difficult to be there longer with my husbands schedule, my moms availability to baby sit and making sure I still have time with my kids. My new schedule for the fall will be (Closed Su, M/Tu,W 10-5/Th 12-7/F,Sa 11-3).

    Please if anyone has any input, specifically on my debt, but other criticisms and suggestions welcome, I appreciate it. I don't have anyone in my life I can talk business with. Thank you!

  2. #2
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    Assuming that net sales is net income (revenue - cost of goods sold), your monthly net income is only barely above your monthly (?) rent, like $500 or so. Your utilities eat nearly that. Your net income most go up significantly or your rent must come down significantly. Everything else is academic at this point.
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    Quote Originally Posted by MrsP614 View Post
    Annual sales tax approx 2400, 150 for a permit for AC, account fee 650-700
    1) What are the account fees for and is this a monthly or annual charge?
    2) $150 a month or year for an AC (air conditioning?) permit?
    3) Annual sales tax works out to $200/month average to the government?

    Edit:

    You need to give us more info about your income and COGS. Give us both pretax and post-tax gross income (I'd like to see a monthly breakdown since you started). What is your average margin across all families of products you sell? Why are you paying shipping to your customer when it's eating up, or even causing a loss, all your profit.

    With that all said, providing that your margins are acceptable, get out there and start beating the bushes to bring in sales.
    Last edited by Fulcrum; 08-02-2017 at 05:12 PM.
    Brad Miedema
    Fulcrum Saw & Tool

  4. #4

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    Quote Originally Posted by fulcrum View Post
    1) what are the account fees for and is this a monthly or annual charge? This was a type accountant fee for tax filing
    2) $150 a month or year for an ac (air conditioning?) permit? This is an annual fee, these were all annual, i meant to put a colon
    3) annual sales tax works out to $200/month average to the government? The 2400 is based on the sales for the past year, all these numbers are based off august 2016-july 2017

    edit:

    You need to give us more info about your income and cogs. Give us both pretax and post-tax gross income (i'd like to see a monthly breakdown since you started). What is your average margin across all families of products you sell? I carry nearly 2000 products from about 60-70 companies, its a specialty store, i brought products together that were once not available to purchase in person. Its like a one stop shop for early development and especially children with developmental delays or sensory/processing why are you paying shipping to your customer when it's eating up, or even causing a loss, all your profit. I am not paying shipping to the customer, i pay shipping on receiving inventory, there are only a handful of companies i can reach minimum for free shipping. I often utilize their promotions to get free shipping but i sometimes have no choice and can not meet a 500 or 1000 reorder for free shipping when i have a couple other companies i need to order from. As for shipping from my website, customer pays but the calculation the website does its almost always off.

    With that all said, providing that your margins are acceptable, get out there and start beating the bushes to bring in sales.
    see reply next to inquiries

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    The only question you answered was about the shipping so that's what I'll address.

    Fix the formula that the website uses so that shipping will be properly calculated.

    Without knowing more specifics about your income and expenses, we can't help you determine exactly what is causing you trouble. Look at your inventory and sales as well. Are there items that are not selling? If so, liquidate them and only reorder them as a special item (higher price and prepaid).
    Brad Miedema
    Fulcrum Saw & Tool

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    Like others have said we need a bit more info. But at first glance it looks like you need to change your entire business model. As was pointed out your sales barely cover your overhead. Also, I’m not sure if your inventory value is at cost or retail. If at retail obviously you are upside down, your liabilities are more than your assets. If that is cost and markup is 70 % or more that would put retail at around $ 34,000. A little better, and gives you a fighting chance.

    A few thoughts, without enough detail to really make a solid recommendation.

    1) Obviously your biggest expense is rent. I don’t know where your location is. But, if you are paying a premium for storefront retail space you may want to consider a less expensive “off the grid” type of space. I don’t know but it seems like your type of merchandise is a specialty without much appeal to the majority of consumers. It sounds like it is more of a specialty destination. Paying a premium for a high profile location may be a waste. That’s counterintuitive for most retail but I don’t know if you benefit from typical retail traffic.
    2) The density of your target customers in your trading area may not justify an expensive location. You may want to do a little demographics study to learn just how many early development and special needs families are in the area.
    3) A less expensive location with some increased expenditures on reaching that niche may be helpful,
    4) Alternatively, you may want to change the mix of products to add more commodity, impulse type kids merchandise. Toys, games, clothing etc. That may help to get customers in “shopping”. I know some shops specialize in educational toys which is probably an easy segue for you. Of course keep the specialty products also.
    5) In line with the above you probably don’t have enough inventory selection to ever significantly increase sales. You are turning inventory 1 or 2 times annually. You either need to turn faster or turn more. A bigger selection of more impulse commodity items can help that. I think the specialty items are what they are, limited in appeal. I know It’s a hard pill to swallow especially when cash strapped and no trade credit to increase inventory.
    6) I don’t know much about online sales but it seems like that may be a better target. It could be the tail that wags the dog. Others on here are much more able to help with that.

    Without much information or knowledge of your business those are my quick thoughts.

  7. #7

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    This is straight from my shopkeep summary from last 12 months...

    Sales 31,852.18
    Discount 2,467.34
    Returns 311.28
    Net Sales 29,073.56
    Gratuity 0.00
    Gift Certificate 680.00
    Tax 2,460.00
    Total Tendered 32,213.56
    Net Cogs 15,628.00
    Gross Margin 46.247%

    The strange thing is my inventory does move and if something doesnt sell I either do not reorder or I donate it in a basket to a school/program.

    As for my location... I'm in Staten Island, New York. Rents are high, theres no avoiding it. I'm in a good location ( not mall, not main road that would be wayyy more expensive) I'm close to main road, near train, I have some parking.

    Staten Island has one of the largest populations of special needs and the island is very family oriented. My market is here, advertising has been tough because it is very expensive. I also give discounts to teachers and therapist because they shop here often and they shop for their patients and students. I give them 10% and they are the ones that refer me often...

    Please feel free to look me up, I'm most active on facebook... Island Sensory Shoppe

    My inventory is not just geared towards special needs. I carry Melissa & Doug, Learning Resources, Hape, Plan Toys... all wonderful toy companies... skill building and/or educational is what I try to go for.... Sensory is huge... I carry lots of fun sensory products for all children... sand, putty,etc.... I carry a wide variety of fidgets, spinners are not the only fidget out there....although I do have those and cubes but the high quality ones... I have inexpensive fidgets for children who just need something to hold, play with, occupy, etc. I carry chewerly and oral motor tools and sensory products.. speech cards, educational and sensory board games, reward charts and visual schedules.. and it all moves....

    My inventory is at cost...

    I don't know if I answered all of your and Paul's questions. Please look me up! Thanks!

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    Here's the reason I asked for monthly numbers for both income and expenses - your hemorrhaging cash and it's a matter of months before you run out.

    I would start by breaking down everything to monthly numbers and holding them up side by side (think overly simplified P&L statements). If income (credits) is less than expenses (debits) my spreadsheet shows in red how much I've over spent that month. In case some are wondering, I do include machine purchases if I pay cash for them (I know it's a depreciated purchase rather than an expense but I'm tracking my cash position like a hawk).

    Back to your numbers:
    Net sales of $29,073.56 plus $1,881 works out to $2579.55 in net sales per month. With a gross margin of 46.247% this works out to $1,192.96 gross profit per month. Your rent alone puts you at a loss of $764.04.

    If your sales have been tracking upwards every month than get out and beat the bushes so you can generate at least $6,000 of gross sales per month. I would consider this your breakeven point with the information provided.

    Steps from here:
    1) Hustle
    2) Increase margins to at least 50% (55-60% would be better)
    3) Hustle
    4) Hustle
    5) Did I mention hustle?
    Brad Miedema
    Fulcrum Saw & Tool

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    If I add up your expenses they come to $ 4,101.00 per month that includes payments on the loan and credit cards. You are generating $ 1,192.96 per month in profit to pay that 4 grand with.

    From an asset/liability standpoint you have 20K in inventory and $ 71,600 in debt used to finance that 20K in inventory.

    I don't like to post negative things but the numbers don't look good at all. Something needs to change or you are not going to make it.

    If your sales have been rapidly increasing then I might feel more optimistic about the outlook.

    With three kids it is hard to devote the time to the business. Being open limited hours 3 days a week may have you there for the peak times but the more you are closed the more people will shop elsewhere.

    The reality is you need to either drastically increase the income or drastically reduce your costs. I am sure rent is not cheap on Staten Island. Would it be possible if you have the space to have another retailer split the space with you. That could cut your overhead a lot. It might also be possible for you to man their space for three days and to have them man your space for 3 days and to be open more which would increases your sales without increasing your overhead.

    You might also want to think about closing the store and relying more on the internet and selling your products from your home. Your overhead would be minimal and even if sales dropped a little the profit you make would be pretty much profit
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    This is a link to a wsj video about Melissa's shop.It's very well done. It may help some of us understand her business better and be able to offer some useful advice. I hope you don't mind me posting this Melissa.


    https://www.wsj.com/articles/a-speci...and-1448575385

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