Ep. 66 – 6 More Independent Retail Business Myths to Stop Believing (Part 2)
As I shared in Episode 65 of the Savvy Shopkeeper Retail Podcast, we hear all sorts of myths as independent retailers. From “the customer’s always right” to “you’ll probably show a loss for your first three years in business,” these myths are repeated so frequently that we just believe them to be true!
Today, I’m sharing six more myths to stop believing in and the evidence I have to prove them wrong.
Myth #7: Business Owners Shouldn’t Share Their Personal Beliefs
This myth was definitely proven wrong in 2020! Business owners who were strong and confident in their beliefs were front and center last year.
Kate, a Master Shopkeepers member, recently shared that she used to believe “sharing your personal beliefs through your shop is too polarizing. But you can stand up for what you believe in as a person through your business.”
I know this isn’t for everyone. Some business owners aren’t comfortable sharing their beliefs, and that’s okay, too.
Myth #8: You Should Use Keystone Pricing for Everything
Keystone pricing is the practice of doubling the wholesale price of products to come up with your retail price. If you buy a wholesale product for ten dollars, you would sell it in your store for twenty dollars.
If you do this for everything, though, there’s a chance you’re hurting your business. There are a lot of factors to consider when you’re pricing beyond the wholesale price! Some examples are demand, perceived value, and seasonality.
Some products might even do better at less than the wholesale price. These are called loss leaders. The concept is that these items are in high demand, bring lots of foot traffic to your store, and are offset by the other products that customers buy when they buy a loss leader.
Pricing is an art, not a formula. Make sure you’re considering all the factors instead of just applying keystone pricing to everything.
Myth #9: It’s Okay NOT to Pay Yourself
If you’ve followed me for a while, you probably know that I’m a passionate advocate for shop owners paying themselves. Here are the reasons why I believe shop owners should pay themselves ASAP:
1. You work hard, and you deserve it. Period.
2. Paying yourself is an incentive. I find that once I set a salary goal and meet it, I work even harder at figuring out how to increase it. It’s a self-set challenge.
3. Tax advantages. I’m by no means a tax or financial expert, but I recommend working with an accountant to determine any potential tax benefits.
4. It’s a good habit. If you’re paying yourself, then this means you’re looking at—and more importantly, understanding—your numbers. This is ALWAYS a good idea in business
5. It forces you off of the “hamster wheel.” If you tell yourself that you will give yourself a salary once you hit “X” goal or if/when this, you may never start. It’s so easy to keep pushing that off.
Myth #10: More Inventory = More Revenue.
Oh, this is a good one! So many shopkeepers believe that the more inventory they have, the more money they’ll make. But it’s just not true! Being overstocked can break a retail business.
If you’re overstocked, it’s for one of two reasons: either you’re overbuying, or you’re hoarding.
So many shopkeepers are afraid to let go of stale merchandise at a discounted price. And I get it. Selling something for less than what you paid is hard. But keeping it can drown a business at worst and result in low profit margins at best.
This is why knowing how to calculate inventory turnover is so essential—along with working on your mindset. If you’re a Shopkeepers Lab or Master Shopkeeper Member, there’s content in the “Guides” section of your membership portal that goes more in-depth on managing your inventory.
Myth #11: High Rent is The Norm
Retail store owners have been taught that high rent is just the norm. And yes, high rents do exist! For some high-end retailers or high-revenue-generating retailers, it makes sense to pay a higher rent cost. But for many micro-retailers, this is a lousy myth to believe.
You should know this is one metric: your rent shouldn’t be more than 6-10% of your annual revenue.
If your store generates $200,000k a year in revenue, your rent should be between $1000-$1666/mo.
Here’s a simple calculation: Take your annual revenue, multiply by .06 (this is on the low end of my 6-10% recommendation), and this will give you the total in rent for the YEAR that you should be paying. If your yearly rent is more, then you’ll want to start making some changes. If it’s less, then give yourself a high five.
I am FIRM on this. If you’re spending too much on rent, you’re cutting into your own pay and profit.
Let’s stop overpaying the commercial building owners, who are most likely already wealthy, okay? I want YOU to reap some of the benefits of your hard work.
Along this line, I want to make sure I give a shout-out to the retailers in the Savvy Shopkeeper community who OWN their buildings. That’s boss. If you’re paying a mortgage, though, you should be using this metric, too.
Myth #12: More Sales = More Profits.
I’ve seen shopkeepers in awe or even envious of other shopkeepers who generate 5-10x as much revenue as they do. But there’s an important lesson here: more revenue does NOT necessarily mean more profit.
You have no idea what’s going on in that back end of that business that you might be envious of.
I’ve seen shopkeepers who generate half a million dollars in revenue, but they aren’t profiting OR paying themselves. I’ve also seen shopkeepers who generate $100K in annual revenue, and they are BOTH profiting AND paying themselves.
Talk about a mic drop, right?
So there are two lessons here…
1. Don’t judge a book by its cover
2. Learn the backend of your business so that no matter what your revenue is, you’re profitable
Want Help Paying Yourself, Profiting, or Growing Your Business?
In my 1:1 coaching, I do deep dives and educational sessions with store owners to learn how to truly understand what’s going on in their business and make decisions that will help them become profitable and GROW.
If you feel an urge or tug to do any of the following, pay yourself, profit, and/or GROW—but the “financials” scare you–I have one bit of advice. Step into the discomfort.
Over the past year, I’ve seen a recurring pattern with my 1:1 clients. They want to work more efficiently, implement systems, and understand their data so they can start making better decisions for themselves and their business.
I realized that if most of my 1:1 clients need to figure out the same things, then most shopkeepers are probably working on these things.
So I’m excited to share some big news: I’ve created a small group coaching program where I’ll teach you how to work less, profit more, and GROW in 12 weeks.
I had one client who tried to find a program like this but was at a loss—even with a background in journalistic research. Someone told her about my podcast, and she booked me for 1:1 sessions. After our last call and learning how to understand her P&L, she said it was “EMPOWERING.” It is.
If you’re a brick-and-mortar store owner who…
• has bookkeeping and inventory management in place, but you don’t know how to analyze or understand the information
• is tired of being on a hamster wheel
• is ready to be empowered by your data
• wants your business to grow, but you’re frustrated because you don’t know HOW
The size of your business doesn’t matter—it’s your determination that matters.
This program won’t have more than 15 participants. I want to keep it small so that I can focus on the business owners and their needs.
My 1:1 clients who are willing to step into the discomfort, invest in themselves and dedicate some time to get this done are the clients who start to transform themselves and their businesses.
This is a 12-week program where we’ll have weekly zoom calls on Mondays. To make sure the program is a good fit for YOU, please fill out the application here.
I promise you that this will be a judgment-free zone, that you’ll be enlightened, that you’ll be empowered, and that you’ll be years ahead of where I was on my journey. Now go apply!
Resources
- How to Price Products in a Retail Store
- Episode 2: How Much Do I Need to Make in Sales in Order to Pay Myself?
- 5 Reasons to Pay Yourself NOW
- Episode 44: The Retail Profit Pie
- The NEW Savvy Shopkeeper Work Less, Profit More, & Grow Small Group Coaching Program
Timestamps
- [02:18] Myth #7: Business Owners Shouldn’t Share Their Personal Beliefs
- [03:22] Myth #8: You Should Use Keystone Pricing for Everything
- [05:12] Myth #9: It’s Okay to NOT Pay Yourself
- [08:56] Myth #10: More Inventory = More Revenue.
- [10:31] Myth #11: High Rent is The Norm
- [13:14] Myth #12: More Sales = More Profit.
- [15:00] Work Less, Profit More, & Grow: a Small Group Coaching Program with Savvy Shopkeeper
