The Unknown Killer to Thriving Business
By: The Casual Flipper
The raw nature of business is full of highs and lows. From personal experience; when there’s a sudden burst of sales and you’re feeling extraordinary this moment could be the downfall of your business.
I’m going to accordingly name this theory the trap. It’s the notion that a surge in sales can negatively impact your business at no fault of your business, but fully at the fault of the operator.
I briefly fell into this rut. Although a small fish compared to many, when sales go x10 what you’re used to I think it qualifies as a surge. Before COVID I took my amazon business pretty casually. That’s where the name came from. During the lockdown, I came to some major realizations and decided I needed to focus my attention more on my own fulfillment. (emotionally, not FBA) This happened in March. Sales improved but nothing dramatic. Same result in May. Then June hit and the flood gates opened. Money was pouring into my account, it felt amazing. But come July; there was nothing left. My reports stated I had a very profitable month but where was the money?
My appetite to spend the cash grew faster than the business. I set absurd goals for the next few months. I told myself the only way to maintain is I have to expand my market; load up on inventory; get the best software possible to give me an edge. Really, what I was doing was setting myself for failure.
My expenses grew, and sales levelled out leaving me scratching my head. I consider myself lucky; I learned this valuable lesson while no true harm was done. I didn’t take on any expenses that I was locked into and I quickly re-evaluated my strategy. I can only imagine the chaos inside large businesses during huge unexpected sale spikes than the despair to follow when it levels out.
Set up a strategy for cash flow. The more you can take yourself out of the decision making the better. I have started using a variation of profit first and it’ has fundamentally changed the way I think about money. I’m much more confident now; heading into the holiday season I’m setting my business up for success.
It has been equally as important for me to evaluate my inventory. Simply because an item sells well doesn’t mean you should buy it. You’re holding up cash; which to most small business is incredibly valuable. I’ve started really critiquing my buying choices. If I want software I set up a spreadsheet to monitor its performance to make sure it’s adding value to my business. Inventory I’m seeking an ROI of 40% or a margin of 30%. As my business grows I will increase my ROI.
Ultimately it comes down to being smart. Don’t confuse that with you have to be smart. It’s about making strategic decisions with the future in mind while understanding the present moment. Don’t get too high, or too low in any situation.
I hope this article serves you well.
The Casual Flipper – Chris