The mantra of American business has always been “bigger is better,” and the focus even for many independent shopkeepers has been on increasing the store’s gross sales figures from year to year.  That may be very difficult to do in today’s economy — but the good news is that a decline in sales does not necessarily mean a loss of profitability.

The key to surviving, and even thriving, when sales take a dip is to make sure that you have “right-sized” your business for this new reality.  If you are making a small profit at your current sales level, and do nothing to change your inventory and expenses when sales decline, you will see that profit disappear.

But the “small is beautiful” slogan that VW used to promote the Beetle (and which followed the "small is beautiful" ethos outlined by E.F. Schumacher) can apply to stores as well. You may be surprised to find that your store can be more profitable, and perhaps be less stressful for you, at a lower level of sales income.

Start by looking at what you predict your sales to be for the year, and then adjust your budget so that your staffing and other variable expenses such as advertising reflect a realistic percentage of what you expect to take in.

It is also important that you plan an open-to-buy budget that will help you bring your inventory level down to a reasonable level for your new sales goal. If you expect $200,000 in sales, you should not have $200,000 (at retail) in inventory on hand as your average inventory.  You will probably need to turn some of your inventory into cash in order to bring down the total, and also to free up money for new merchandise.

The hardest adjustment is in your location, and rent expense. If it looks like sales are not likely to increase in the foreseeable future, consider moving to a smaller, or less expensive location. Or perhaps you could divide your space and share it with another retailer, or a craftsperson. 

In facing the reality of a smaller retail operation, it may be challenging to still take risks and try new lines.  But whether on a large or small scale, it is your creativity as a merchant that will lead to success.  Don’t downsize your enthusiasm as a retailer even if you have to reduce the scale of your store.

Happy Retailing,

Carol “Orange” Schroeder