Ep. 62 10 Tips for Cutting Your Retail Business Expenses
If you’re in the US, tax season is upon us. Many shopkeepers are trying to clean up or catch up on their bookkeeping for 2020.
Retailers spend 40-60% of the money we generate on goods, or COGs (cost of goods). That’s a substantial part of our pie!
The rest is meant for expenses, your pay, and hopefully, your profit. Having a good grasp on where you’re spending for expenses is just as important as your profit margin and how much you’re marking up your goods.
You work HARD for your business. I’m a firm believer that retailers should get a piece of their own pie, whether it’s the form of profit, pay, or both.
Cutting expenses is one of several ways that you can make your piece of the pie bigger.
Here are just a few ideas to help retail business owners cut expenses.
1. Keep Detailed Books So You Know Where Your Money is Going
If you use accounting software or if you have a bookkeeper, you’ll end up with a Profit and Loss statement for the year.
Each year, I run the P&L in Wave (my accounting software), and I take a really good look at the detailed version of it.
I want to have a crystal clear picture of where my money is being spent when I have the P&L in my hand—the more detailed, the better!
2. Keep Your Misc. Expenses to a Minimum (Or Eliminate the Category Altogether)
When I add a new business expense, it gets categorized. In bookkeeping speak, this is an “account.” For example, if I pay the Illuminating Co. for our electricity bill, that gets classified as a utility bill. If I pay for printer ink, that goes in the Office Supply category. And if I pay for rent, well, that’s the Rent category.
Many retail stores have a “Miscellaneous” category, too. For my store, though, I try to create detailed accounts in my bookkeeping, so my “Miscellaneous” category doesn’t turn an item on my P&L statement that has thousands of dollars of expenses under it.
Keep your miscellaneous expenses as low as possible, or better yet, don’t have a miscellaneous category at all.
3. Negotiate Recurring Fees
You might think of your rent, point-of-sale system fees, and credit card rates as set in stone, but they’re actually negotiable!
Have you increased your sales volume in the past few years but never negotiated with Square or Shopify for a better rate? Call them. It never hurts to ask.
Are you renewing your lease soon? Ask your landlord for a reduction for a few months as an incentive for staying in the same space.
Do you always pay your credit card bill on time? Call the card issuer and negotiate a lower interest rate because you’re a customer in good standing.
4. Be on the Lookout for Better Deals
Many vendors will price match if you come to them with a competitor’s price for the same or a very similar product. They want to keep you as a client, so try asking them to match the better price! That way, you don’t have to switch vendors, and they keep your business. It’s a win for everyone (but especially for you!).
5. Buy in Bulk
If you host workshops or events, stock up on snacks and beverages in bulk from Costco or Sam’s Club. You’ll avoid extra trips to the grocery store and save money in the process. This might seem obvious, but it’s something that many micro-retailers don’t think of until they’re looking at their Retail Profit Pie and wondering why their expenses are sky-high.
6. Go Paperless
If you’ve ever gone to buy ink and spent $50 on a black cartridge and $50 on a color cartridge, you know that paper and ink can quickly add up.
Instead of printing every receipt for your bookkeeper, save them as PDFs on your computer or your Google Drive account. No matter what you print for your store, I bet there’s a way to do it digitally.
7. Pay for Your Recurring Expenses in One Fell Swoop
There are lots of recurring expenses associated with running a store. Many of these can be paid for on a yearly or quarterly basis at a lower rate!
Start by going through your expenses list and make sure you’re still using every single subscription. Then, check out the pricing page and switch to an annual or quarterly subscription to save a month or two off your subscription price.
I just did this a few days ago with the tools I use, like Canva, Plann, Calendly, and Zoom!
8. Pay Your Invoices or Bills Early
The best example I have for this is the sales tax I pay each month for my store. In the State of Ohio’s portal, there’s an option to save 2-3% on sales tax if I pay a week early each month. That’s not huge, but it all adds up.
If you’re in business for ten years, it can make a difference. You’re compounding the amount of money you can save over time.
9. Evaluate the Personal Expenses That You Can Write Off
You should try to save money on your personal expenses separately, of course, but the personal and business expenses you have sometimes intersect. When they do, you might be able to write them off for tax purposes.
For example, I run two businesses and use my cell phone to do a lot of that work. About 80% of my cell phone usage is for my businesses. So I write off a good portion of that cell phone bill.
I’ve had the same number for over a decade, maybe even longer, and I just got into this routine and was automatically deducted. I didn’t think about my plan because I never felt like I needed any more data or texting. But I reached out to them last year and asked for a better plan. I ended up with a better plan, better service, and a much lower price.
Had I just been on top of my expenses and reached out earlier, I would have saved probably $1,000. So again, don’t neglect those personal expenses that you can also cut.
10. Change Your Money Mindset
I find that there’s a lot of resistance to cutting expenses and much of it is about mindset. Here are some ways that your mindset is blocking you from cutting costs.
Time Scarcity
Doing this for your business is too important to dismiss. I have many episodes coming up on time management, but my best tip is this: schedule the time to get this done and make it a priority.
Fear of Tough Conversations
I often hear this from retailers as “my landlord is a jerk, and I don’t want to deal with him.” If it makes you uncomfortable, most likely, it means it’s something you NEED to do for your business. I tell my 1:1 clients to step into the discomfort and make the necessary calls. Your business is too important not to.
Worry About Judgement
Sometimes we worry about coming across as cheap or frugal. I encourage you to ask yourself, “does it matter what they think? Or is it more important to be the Retail CEO and make your business the best it can be?”
Procrastination
Procrastination is you feeding the toddler version of yourself. You want to feel good, so you’ll avoid the discomfort of something you don’t like or don’t enjoy doing by putting it off. But do you want a toddler running your business? I bet not!
Want even more tips on reducing your business expenses? Download my free resource called 20 Tips for Cutting Retail Expenses. And if you’re a Master Shopkeepers member, be sure to watch the hour-long masterclass on this topic with Sarah Nemecek of WE Profit Foundry.
Resources
Timestamps
- [01:24] Keep detailed books so you know where your money is going
- [02:37] Keep your misc. expenses to a minimum (or eliminate the category altogether)
- [06:29] Negotiate recurring fees
- [07:30] Be on the lookout for better deals
- [07:59] Buy in bulk
- [09:56] Go paperless
- [10:49] Pay for your recurring expenses in one fell swoop
- [11:54] Pay your invoices or bills early
- [12:38] Evaluate the personal expenses that you can write off
- [14:38] Change your money mindset
