6 Ways to Increase Profits in Retail
The Dow may be hovering at record highs, but small retailers still feel the pinch of the recession. Yet many independent store owners are thriving. What’s their secret? Here are six tips from retailers and business experts for weathering the rough economy.
1. Improve Your Bookkeeping
Most retailers opt to manage their own books, using data from point of sale systems. Even so, a bookkeeper lends a valuable hand, ensuring your POS and bookkeeping software play well together. This can save thousands of dollars in accounting fees, according to Paul Daughtry, the owner of This & That Gift Gallery in Carrboro, NC.
Daughtry employs a bookkeeper—at less than half the cost of a CPA—for roughly four hours each week to make sure his store’s POS data is correctly recorded in the accounting software. When tax time rolls around, his accountant has less work to do because the books are well kept. And the one-two punch is a serious money-saver. “We probably save $10 grand a year,” Daughtry says.
2. Invest in an Accountant
“The best money you’ll ever spend is to invest with a good CPA,” says Tara Dugan, the owner of Scout & Annie Vintage Homegoods in Kennett Square, PA.
A knowledgeable accountant makes sure you file taxes properly and claim every possible tax credit or deduction—and more. Many businesses lose about 5 percent of their revenues to fraud, according to Marilyn Niwao, the first vice president of the National Society of Accountants, and an accountant in Wailuku, HI. “A professional accountant can help a business identify its risk areas and develop practical solutions to reduce losses due to fraud,” she says.
3. Negotiate a Lower Credit Card Processing Fee from Your Bank
The market for credit card processing is more diverse than ever. New products, like Paypal’s credit card reader for smartphones, give retailers low-cost options to process credit card purchases.
Don’t be afraid to remind your bank about all the competition. If you ask for a lower annual fee, your bank may meet your request in order to retain your business. That could save you a huge portion of annual revenues each year. Also check with your local Chamber of Commerce, which may offer a discounted processing package as a member benefit.
4. Claim Tax Credits for Health Insurance Premiums
Health insurance is a major expense for business owners. Starting this year, certain small businesses are eligible for an expanded federal tax credit covering insurance premiums. The insurance plans must be purchased through the Small Business Health Options Program.
“In 2014 and 2015, small businesses with less than 25 full-time or full-time-equivalent employees with average annual wages of less than $50,000 may qualify for the Small Business Health Care tax credit,” says Niwao. Check with your CPA to verify that you qualify.
The savings can be big. “The credit is up to 50 percent of health insurance premiums paid for small business employees, and is maximized for small businesses of 10 or fewer employees (excluding owners and related parties) earning $25,000 or less annually,” says Niwao.
5. Staff Your Store Appropriately
Learn from big-box stores, which follow a simple principle: increase staff during busy hours, decrease staff during slow hours.
“Measure everything,” says Paul Lencioni, the owner of Blue Goose Market, a grocery store in St. Charles, IL. One of his cashiers might be able to handle $900 in sales per hour. By looking at POS data, Lencioni can tell whether hourly sales have risen to $1,200. If this is a trend, he can afford to bring in an additional cashier to better serve his customers during these busier periods.
6. Let Go of Bad Employees—and Pay Good Employees Generously
“In a bad economy, there is nothing more expensive than underperforming employees,” says Lencioni. And nothing more cost-effective than good ones. Retailers can reap major benefits by compensating strong employees.
“No matter what you have to pay a good person, it’s always cheaper than the amount of money you saved paying somebody who’s not doing what you need them to do,” Lencioni says.
Whether the economy is good or bad, this advice from retail and business experts will help pad your bottom line.
Gabe Rivin is the owner of The Piedmont Pen, a freelance writing and editing company. He writes for a wide variety of clients, including school districts, businesses, news sites and professional basketball teams.