If you’ve borrowed money to capitalize your store, you are probably paying around 8% interest on the loan. Assuming you can’t negotiate that down to a lower rate, you may want to look at what you are paying for toilet paper.

Yes, you heard me right.  If you can’t save money on your business loan, you should be looking for other ways to economize in order to protect your bottom line.  Toilet paper is an easy example. If you normally pay $5 for a package of 4 rolls, but can stock up by paying $20 for a package of 20 rolls, you have saved  20% on this necessary supply item. 

Another example would be purchasing merchandise at a discount by getting a show special, or by ordering in case packs.  Case pack discounts are often 10%, and this is a great deal if you are certain you can sell every item in a reasonable amount of time.  (We all know of people who go to Costco and are seduced by the low prices to buy more than they need, which is a trap to avoid.)

Do you have merchandise on your shelves that is getting shopworn or out of date? Think about the fact that you are paying 8% on every dollar you have invested in those goods, and get them moved out. Even if you need to mark something down drastically, it’s a good idea to free up your borrowed funds to invest in something that is likely to sell better.

Watch for special offers for paying an invoice sooner than 30 days.  The terms 2% 10/net 30 are not as common as they once were, but if you can get 2% off for paying 20 days earlier, it’s a good use of your money.  As an example, if the invoice is $1,000 it would cost you about $4.25 to borrow it for 20 more days (at 8% interest), but you’d save $20 by paying early.

If you don’t have a business loan, but instead are using credit cards to help finance your inventory, you need to be very careful to pay off the balance every month. It’s hard enough to make a shop profitable with money borrowed at 8%, but if you’re paying 13%-24%, it’s almost impossible.

Happy Retailing,

Carol “Orange” Schroeder