Article by Cathy Donovan Wagner
Let me guess. Your immediate response is… “NO! And I don’t have any warts!”
Are you sure?
The story goes that if you put a frog in a pot of boiling water it will jump out immediately. The frog recognizes that a pot full of boiling water isn’t conducive to a long, happy and peaceful life. However, if you put that same smart frog into a pot of cold water sitting on the stove, turn the flame on low and slowly bring it to a boil, then you get a different outcome. The frog will sit in that cold water and not notice the slowly changing temperature until it is too late and the little guy can’t jump out and becomes frog soup.
I have spoken to many retailers that are frogs.
You don’t buy a business that is bleeding money. You don’t start a business with the intention of not being able to pay yourself what you are worth. You don’t include a line item in your business plan stating that you will ALWAYS pay vendors late. You don’t lay in bed at night thinking, “I can’t wait to open my own store so that I can lay in bed at night worrying about how there is no cash flow.”
You would never intentionally jump into a pot of boiling water. You are too smart for that.
What I see happen to many very smart people, like you, is that they FIND themselves in boiling water. It never happens overnight. I know. It happened to me. Sales weren’t what they should be and cash got tight. My mentor told me that it takes 18 months to cash flow out of one bad season. Well, what if you have 2 in a row? The water in my pot was SO HOT!
Every retailer’s hope springs eternal. We are all sure that the next season (or month or week or vendor) will be fantastic and we will make up the difference then! But it didn’t happen for me. Ultimately, I had to take on additional long term debt and make some big changes in order to not die in that rolling boiling water. It led me to my life’s work – which is to keep other retailers out of hot water!
What about you? Is your water getting a little too warm? I don’t want you to be oblivious to the slowly rising temperature in your store…I mean pot!
I have put together a list of warning signals cautioning you to make a change now before you become frog soup:
• You owe the state or federal government for past due sales or income tax.• Your staffing stays the same each month independent of sales forecasts.• You make advertising and marketing decisions based on cash flow.• You are paying off last season’s invoices with this season’s sales.• You don’t know how much you owe on your credit cards.• Your rent is more than 8% of your sales.• On last year’s taxes, your cost of goods was more than 55% of your sales.• Over half of your inventory was received more than 60 days ago.• Last year, your paycheck was less than 10% of your store’s 2010 sales (net of sales tax).
There are very few exceptions to the above list. So, I don’t want you to be quick to make an excuse for yourself. Our friend the frog could have blamed the weather for the temperature change too!
If it seems hotter than it should be, then take action.
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About the Author
“Cathy Donovan Wagner is the founder of http://www.RETAILMavens.com, a company devoted to teaching independent and specialty retailers how to explode their profits, get better results, have more fun and get better sleep. To find out more, visit http://www.RETAILMavens.com and sign up to receive a F.R.E.E. audio CD on “The 3 Retail Secrets to Increasing Retail Sales & Profits in the Next 30 days.”"
