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How to Prepare for Inflation

inflation

Everyone is feeling the effects of inflation. For small businesses this means a dip in customers and cutting back on inventory (among much more). Read on for tips on how to prepare for the long run of high inflation.

Improve Cash Flow

According to Forbes, small business have two options: commit to staying small or commit to growth. Both of these tactics are different ways to manage your business until inflation returns to a more normal range.

If you plan on maintaining the status quo, the goal is to save money and improve your cash flow. There are a variety of ways to do this including cutting all nonessentials and finding ways to minimize production costs. Another way is to focus marketing efforts on your current customer base.

After you save money you have to invest it wisely. Your investments should be outpacing or, at the least, keeping up with rising inflation.

Commit to Growth

The second option is committing to growth. The goal of this tactic is to generate enough revenue to stay ahead of inflation. There are several ways to stay ahead including evaluating your pricing strategy, increasing marketing, and investing in your own business.

Of course, there are several ways to invest in your business. One way is through investing in technology to improve productivity. Another is through applying for a small business loan or taking out a line of credit. The Federal Reserve expects six more interest rate hikes in 2022, so the sooner you take a loan out the better.


If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.

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Payroll Made Easy: Part Two

payroll

Last week we learned how to calculate payroll as well as how to pay yourself an owner’s salary. In part two of Payroll Made Easy find out if you can afford additional employees and how your payroll can be covered through cash flow management.

Managing Cash Flow

To alleviate the stress of wondering if you have enough money to pay yourself and your staff, we revisit the term real revenue.

First, open a separate payroll bank account and fund that account with a percentage of real revenue. To calculate the percentage, determine the percent of real revenue to payroll costs you’ve used in the past.

For example, a company determines their real revenue is $600,000. Their payroll costs were $120,000 (less than the the suggested payroll costs). Since $120,000 is 20% of $600,000, 20% of your revenue should be contributing to the payroll account each pay period. Since revenue fluctuates each month this number will be lower some months and higher others, but the extra cash flow should cover future shortfall.

Payroll for Additional Employees

According to “Profit First,” by Mike Michalowicz, your business should generate real revenue of $150,000 to $250,000 for each full-time employee.

This metric is great to determine if you’re overstaffed or understaffed. Additionally, another good test for hiring is to set the projected salary aside for a few months. By the time you’re ready to hire, you’ll have enough salary saved to afford time for adequate training.

Inspiration for this post came from “Meeting Payroll” by Marcia Donaldson published in the April 2022 issue of American Quilt Retailer.


If you’re looking for more information to guide you in owning a retail business, subscribe to American Quilt Retailer today. Already a subscriber? No worries—join our Facebook group for insights and dialogue from industry specialists like you. And don’t forget, you can always purchase single issues if you prefer that instead.