Ep. 31 Financial Foundations for Brick and Mortar Store Owners
As a child, I grew up poor. I remember wanting a cash register and an adding machine so badly so that I could “play store.” It’s incredible to me as I look back now. I knew at such a young age that I wanted to be an entrepreneur.
Fast forward to college, and I obtained a bachelor’s in Business. I took a different path and didn’t return to my business roots until over 20 years later.
Getting Back to Business
When I started The Salvaged Boutique with my sister, I knew I needed to do a few things, like separate my personal finances from business finances.
I also knew I needed to start bookkeeping early so I could analyze our business finances. What that looked like, I had no idea! But I signed up for a bookkeeping account in Wave.
I vaguely knew that I needed to get separate expense accounts to have organized books, such as an account for office supplies, an account for travel, an account for training and education, and an account for website expenses. Whether you do your own bookkeeping or if you have a bookkeeper do this for you, you’ll see a list of these expense accounts on your Profit and Loss statement.
But that’s where my knowledge stopped. And then I realized I had no idea what to do with the information in my bookkeeping software.
You Don’t Know What You Don’t Know
I had no idea how to read a P&L statement, and I certainly didn’t know if I was doing things correctly. I didn’t even know if I was hitting retail benchmarks. I didn’t even realize there were benchmarks to strive for in retail!
Why? Because if this was covered in school—I didn’t remember it. My sister and I just took a leap of faith without a mentor or advisor. We worked to get stuff done and kept moving forward.
That’s how shopkeepers work. We are worker bees. We are so passionate about what we do, and we don’t hesitate to do the manual and physical work.
I often hear so many shopkeepers say, “I don’t really know what I’m doing, I didn’t go to business school, I just knew I wanted my own store, so I opened it.”
Well, I went to school for business, and even though I had retained a little of that knowledge, I certainly lacked in many other areas. So I started educating myself, and still do to this day.
How I Educated Myself
A couple of years after opening our store, I learned about the rent to sales metric and benchmark for retail brick and mortar business owners. Ideally, this should be 6-10% of your gross revenue.
I calculated ours and felt accomplished because ours was around 8%. I had to recognize that it was a combination of luck along with my sister and me being frugal that got us there. It was NOT because I knew this is where we needed to be to have a healthy and profitable retail business.
Soon after, I had financial conversations with Sarah Nemecek of WE Profit Foundry. I learned I had some things miscategorized in my bookkeeping software.
So when I proudly boasted that our profit margin was 58%—an excellent margin in retail!—I was WRONG. Once I made corrections, our real profit margin was more like 49%. I’ll be honest: this was disappointing to me.
One thing we did get right along the way was mastering our expenses. We kept them low enough and focused on increasing profit margins so that we could profit from day one.
You Can Understand Your Store’s Finances, Too
Now, there’s strategy and planning when I look at my numbers.
Because I am a shopkeeper and I have so many conversations with fellow shopkeepers, I get a firsthand look at where they need help the most.
In Master Shopkeepers, our mastermind for brick and mortar store owners, I fill this need for education and information by either teaching masterclasses myself or bringing experts in to teach.
With over 20 masterclasses available in Master Shopkeepers, I was surprised to learn that two of the most popular classes were financial-related. These two classes teach members how to read a P&L and how to keep an eye on expenses.
Brick and mortar store owners are experiencing challenging times right now. One thing I’ve seen is that there are so many of us who not only want to survive but also thrive in the future.
A strong foundation in understanding your store’s finances is key to a thriving business. That’s why Sarah (of WE Profit Foundry) and I are collaborating to bring you a 2-hour online workshop packed with the foundational financial information you’ve always wanted to learn.
The information we’re teaching in Master Shopkeepers is valuable. It has transformed shopkeepers’ businesses. We want to bring some of these most important lessons to all of you in our upcoming online workshop on Monday, July 6, 2020, at 1 pm EST.
This live, online workshop consists of 3 lessons. We’ll have a Q&A at the end, and there’s a digital workbook that you can download and print. The cost of the workshop is $79. Class size is limited, so make sure to grab a seat and join us on July 6!
If you have questions about this workshop, you can always DM me on Instagram or send me an email. I can’t wait to see you at our Financial Foundations workshop!
- Shopkeeper Shoutout: The Green Monkey
- My favorite bookkeeping tool, Wave
- WE Profit Foundry
- Master Shopkeepers (currently closed, but be sure to put yourself on the waitlist for this incredible mastermind of shopkeepers around the globe!)
- Sign up for the Financial Foundations workshop on July 6, 2020 at 1 PM EST
- [00:52] Shopkeeper Shoutout: The Green Monkey
- [3:20] Getting back to business
- [6:08] You don’t know what you don’t know
- [7:25] How I educated myself
- [11:46] You can understand your store’s finances, too