My billings are scheduled in such a way that I know how much I've spent by the 10th of every month. So I know how much I have to earn the rest of the month.
The thing about my new tactic of trying for a 'working profit' -- paying all bills, personal and business, and all inventory, but not trying for 'extra' profit -- is that it is much easier to reach. At the same time, though, it's much more important that I not miss my goal.
Making 'extra' profit -- savings and retirement -- at least insulated me from down months, in that the extra often became what kept me from losing money.
Still, the reasoning behind removing this buffer is that I am able to stock the store better, with the result -- hopefully -- of more often having the item in stock, and -- hopefully -- making more sales.
I'm gambling, in a sense, that by spending that last 10%, that I can increase sales by at least 10% -- or maybe even more.
The downside of spending to the absolute level of estimates is that eventually -- inevitably -- I'll get it wrong. It pushes, pushes, pushes sales. But any slack, and I overshoot. I did this for most of the boom, and then would make up for it during the busy months. So it was pushing the boundaries as much as possible, and then having to catch up when I miscalculate.
This is a growth strategy, not a consolidation strategy.
I guess I'm feeling more confident in my projections, and the bigger I can grow my sales the more margin I can squeeze over the long run. A consolidation strategy is fine during emergencies, but you don't want to stick to them for too long, or you'll get old and stale.
I'm going to try this tactic for a quarter or two, and if it doesn't work, then I'll go back to previous methods.
Why take the risk?
First of all, if one has sufficient money in the bank, it isn't a risk to the business, only to the cash flow. You can adjust. Only if you continue to make bad estimates or continue to ignore bad results, does this become a risk.
Secondly, I don't think you can run a vibrant business without risk. Sure you might be able to eke out a business for a number of years, but it'll show. We've all been in stores that seem like that haven't done anything risky in years...
So I'm back to the process of pitting my judgment against the world. And the more I get it right, the more reward there will be. The risk/reward ratio works both ways. While I often warn that reaching for huge returns by taking huge risks is a recipe for disaster, I could also make the case that not taking any risk would result in not making any reward.
The thing about my new tactic of trying for a 'working profit' -- paying all bills, personal and business, and all inventory, but not trying for 'extra' profit -- is that it is much easier to reach. At the same time, though, it's much more important that I not miss my goal.
Making 'extra' profit -- savings and retirement -- at least insulated me from down months, in that the extra often became what kept me from losing money.
Still, the reasoning behind removing this buffer is that I am able to stock the store better, with the result -- hopefully -- of more often having the item in stock, and -- hopefully -- making more sales.
I'm gambling, in a sense, that by spending that last 10%, that I can increase sales by at least 10% -- or maybe even more.
The downside of spending to the absolute level of estimates is that eventually -- inevitably -- I'll get it wrong. It pushes, pushes, pushes sales. But any slack, and I overshoot. I did this for most of the boom, and then would make up for it during the busy months. So it was pushing the boundaries as much as possible, and then having to catch up when I miscalculate.
This is a growth strategy, not a consolidation strategy.
I guess I'm feeling more confident in my projections, and the bigger I can grow my sales the more margin I can squeeze over the long run. A consolidation strategy is fine during emergencies, but you don't want to stick to them for too long, or you'll get old and stale.
I'm going to try this tactic for a quarter or two, and if it doesn't work, then I'll go back to previous methods.
Why take the risk?
First of all, if one has sufficient money in the bank, it isn't a risk to the business, only to the cash flow. You can adjust. Only if you continue to make bad estimates or continue to ignore bad results, does this become a risk.
Secondly, I don't think you can run a vibrant business without risk. Sure you might be able to eke out a business for a number of years, but it'll show. We've all been in stores that seem like that haven't done anything risky in years...
So I'm back to the process of pitting my judgment against the world. And the more I get it right, the more reward there will be. The risk/reward ratio works both ways. While I often warn that reaching for huge returns by taking huge risks is a recipe for disaster, I could also make the case that not taking any risk would result in not making any reward.