7 Financial Tips Boutique Owners Must Know | Ashley Alderson, The Boutique Hub

Good morning. Good morning. How's it going today, guys? I'm a little shaky here with the whole video, but I'm so excited to come live and chat with you. So this is kind of part of our tip Tuesday, which is overflowing now into Wednesday, but such an important topic that I can't wait to visit with you about today. So I wanted to come live and do a video with you and talk about seven tips that are must knows for any boutique owner who wants to grow. Having to deal with your finances and your inventory and actually knowing and tracking the numbers in your boutique. So these tips are so important because I feel like if there are questions that I hear most often or complaints that I hear most often in any of our communities at the Boutique Hub, it's that I'm not paying myself or they say it takes five years to be profitable. So I'm just holding out for five years or why am I not growing? Or my money keeps going down a black hole and now my husband's mad at me. Do any of these sound familiar to you? I hear them all the time and the truth is they're bogus. These are complaints that should never happen if you are managing your money, if you're tracking your numbers and if you have a clear strategy to grow your business. So I wanted to talk about these because these seven tips are just so crucial to your business. So if you're just joining, say hi below. Good morning. Good morning. I'm sitting outside and it's raining a little bit, so hopefully it doesn't open up in downpour. And hopefully the UPS man doesn't come because it's about to get real interesting if he does. So say hi if you're, if you're here, if you're below, if you're just joining and we haven't met yet, I'm Ashley. I'm the founder at the Boutique Hub. I'm a boutique marketing expert and coach herder of cats and connector of everyone in the boutique industry. So our mission is on the deepest level to have great impact in the world. Not just by impacting boutique owners and their businesses, to help their businesses be more successful, but ultimately their families and their staff and their staff's families and the community around them. So I'm a big believer in the shop small movement and helping business owners have impact in the greatest way possible. Because when they have impact, they can then impact others, which is super cool. That's why we're all here, right? So I want to get to it. I want to talk about these seven tips because I know that you are going to be saying amen right along with me as we go through them. So say hi below and be sure to drop your question questions as you think of them as we go. And we'll talk about your questions at the end. And then I want to talk about what's coming later today inside of the boutique hub and give you an invite to that as well. So I made a couple of notes for my seven tips, so bear with me. But the first thing I really want to talk about before I even get into the tips, like I mentioned before, is that only a track number grows. You guys have heard this, right? So you can't grow your finances if you don't know what your base numbers are to begin with. And you can't manage your inventory if you don't know what your inventory levels are to begin with. And you can't track your website conversions if you don't know how much traffic you're getting on an average basis and watching the ebbs and flows in those numbers. And hopefully you all know what your website conversion rates are, because then you can start testing, making changes to your website and actually manage growth. But if we're just throwing things at the wall and hope they stick, there's no way to have any success with those strategies. So you guys are so quiet. Say hi below if you're here. So only a track number grows. That's why these seven tips are just so important. So let's get started. The very first tip is to get organized. Tip number one, so simple. I think that a lot of boutique owners get started in their business because they're creative and they love all the pretty things. Like who loves to make it rain pretty things? You do. I do. We like to shop that. We don't like to use the analytical side of our brains so much and track those numbers and get organized about them. So hopefully you all have QuickBooks installed or some method for tracking all of your income and all of your expenses. And you're not just throwing receipts and a whole bunch of junk in a drawer somewhere and hoping that your accountant can sort it out at the end of the year, because that'll never work. You'll never find success with that method. So start simple. Start. Start with your calendar and hold yourself accountable. To have a date on your calendar every two weeks where you're going through all of the income, all the expenses in your business and you're keeping your books up to date. Weekly would be better. But let's just start Small and say every two weeks, get organized. Get all of your receipts, know what you can write off, talk to your accountant and make sure you're tracking mileage and all these little extras that we forget. Get them into QuickBooks. The app is so simple to sync up with Shopify or BigCommerce or whatever you have and start small. Get organized. Tip number two is to start tracking and understanding your sales by class and by category. So I know a lot of you think about your sales in terms of tops, bottoms, dresses, accessories, like the bare minimum. But the truth is, within the category of tops, there's graphic tees, there's tanks, there's fashion tops, there's kimonos and there's dusters. There's all these different stuff styles that we could track, we could also track by brand, right? Once we start to understand the minutiae and the detail of the classes that we're selling in, the categories that we're selling, then we can start to understand what's actually working within those classes and what's not. So maybe you're overstocked in graphic tees, but fashion tops are really what's your fastest turning product. So you have to know the difference between the two and be tracking the difference between the two to know where to put your money when you're starting to buy. Make sense? You have to know that if you're selling online, if denim isn't moving for you, it's not just by whim that you know denim isn't moving for you, but it's by actual number that you're tracking those numbers within those classes and you can see how fast those items are turning. And when I say turn, jump in. If you have a question, what turn means is how fast are you turning the product? Are you turning the inventory that you have on hand? How fast are you selling through those items and having to restock? So if you're selling through items fast, you're turning them fast. If you have a hot seller, you're going to be restocking those items. If you have a slower turn on those items, you know that's probably not the best fit for your customer either, period. Or maybe right now, maybe you just brought in velvet and your people weren't ready for velvet yet. They'll be ready in 2018 for Velvet. If you're in the Midwest, that might very well be the case for you. But once you start to understand those numbers and track them in the detail, then you can know what is successful and what's not. So first thing, get Organized, start at least holding yourself accountable to get all those pieces in one place. And the second thing is starting to understand those sales by class. The other thing I want to mention when it comes to understanding the sales by class and what classes and categories are moving for you is understanding your aged inventory. So how long have you had something on hand and what do you do with it if it's been sitting there for a while? So Barbara Chigoda and I were just talking about this. She's in Boutique Bootcamp right now, and she made a great post about it in the group a couple of weeks ago. She had a lot of items that were just sitting there by a certain brand who she felt like, oh, maybe this brand isn't a great fit for my store. She had posted things once as new arrivals and maybe reposted it again later on in a recap post, but they still weren't moving. So the first thing you do if you have something that's sitting there and it's not moving is restyle it. Right? Restyle it. Put it with something else. A boutique owner's job is to help educate your customers on how to wear something, how to pair it, how to wear it. You're the coach, you're the teacher for all of your customers. So start with restyling it, reshoot it, relaunch it, and if it isn't starting to move and turn fast in that next one to two weeks, then you start your markdown process and you start to move it. Same is true if you have a storefront. And you guys all know this, if something's not moving, you move it around and you re merchandise it, show it a new way. And then if it's still not moving, then you can, then you can mark it down and move it. The other thing you can always do is relaunch it as a new arrival, reshoot it on a new model in a new fashion, and relaunch it a month later if you want as a new arrival. You know, it's funny because our customers, they aren't always ready to buy the second that we launch a new arrival. Maybe they like something, but maybe they just viewed your new arrivals on their phone while they were picking their kids up at school or they were in the middle of something. So just because they see it and they don't buy immediately doesn't mean they're not interested in it. So it's up to us to keep restyling, reshooting and reshowing what we have on hand. The average person has to see something seven times before they take action on it, which is kind of a scary, overwhelming number. But if you think about how fast social media goes today, it's no wonder that they have to see things so many times before it actually sets in and they take action on it. So restyle, reshoot and relaunch those products if they aren't moving, start understanding how long those classes have been on hand and knowing what classes work for your customers and which classes don't. And we're going to talk more about this whole topic of failing fast later because a great leader in our industry just wrote a great article on this topic. But the idea of failing fast is testing something out quickly to see if it works and see if it doesn't and then move on. Money can be made in failing fast. Don't be scared. Fail fast. All right, Tip number three is knowing your cost and knowing your margins. So it's amazing to me how many new business owners we get inside of the boutique hub and they have no idea what their margin is. So let's just start with this. If you're not marking your items up at least 2.25 to 3 times, and on a lot of items, even more than that, if you don't have that basic markup, you don't have a business. If you're only marking items up two times or less than two times, if you're a buy in group and you're watching this, you don't have a business. There's no way that business model is sustainable over time. You can't ever expect to pay yourself to pay employees. If you ever expect to grow or to make investments in your business if you don't have that money on hand to do it. Now let's go into a little psychology for a second. Sometimes as women, I think we feel like we have to give so much value that we don't ask for enough in return. We think we have to be the cheapest in order to make a sale. And that's absolutely not the truth in retail. The truth in retail is you can sell your products at the point in which, in the customer's mind anyway, your perceived value exceeds the pain of that price. Right? Whenever value exceeds price, that's the point in which someone buys. So if the customer looks at your buying group and says, really, there's no brand here, there's no value here, it's just kind of a bunch of cheap stuff like on any bargain site or deal site, which there's a million of those out there, there's no Value, there's no brand. And you're training your customers to be a bargain shopper and not to be someone that you build a relationship with and keep over the long term. So knowing your cost and knowing your margins is crucial. How do you determine that? If you're just watching that and you're new, you're looking at your wholesale cost times your markup, which. Let's go at least two and a half to three, please go at least three. And then understanding if that is where the market will support it or if you can go even more. Don't ever get stuck just on. Well, I marked it up two and a half. And two and a half is just enough. No, you want to start high. If it's two and a half and you've seen that product stocked at other stores or other boutiques and it's still higher than yours, it's okay to go higher. And the real successful business owners will tell you that it's a hunt. And the most successful hunters are the ones that last in business. When you can seek out products for the best deal, for the best margin. Like if you're traveling direct to LA and you're getting a two to three dollar discount on items, then you're not just shopping at shows, which we know have like a huge markup on them. If you're just shopping at Magic or any Dallas, whatever, any of these shows, that if you're just getting the base price that they're telling you they're offering at the show, a lot of times that's higher. If you are brave enough to just ask the question, you can negotiate with a lot of your vendors to get those prices back down again. So be smart about what you're buying and don't be afraid to ask what's the worst they can tell you. What's the worst thing they can tell you? No. Right. So silly for you for not asking for a better deal because a lot of times some of the most successful boutiques out there get them and you can too, you just have to ask. So you're marking your wholesale items up that couple of times, you're adding on shipping, shipping to you. And then if you're doing free shipping, obviously shipping back to the customer. If you are not adding in shipping but you're offering free shipping, shame on you because again, that's not a business, that's not sustainable. Shipping costs are always on the rise and so shipping is the number one place. A lot of boutiques lose money, hand over fees, but they never really dig into the Data enough to understand how that's affecting them in their business and what that looks like in their business. So understand where your shipping costs are at and if it's eating you alive, maybe free shipping isn't the way to go for your business. But that's something that has to be tested within your business. You know, some businesses will only offer it as a special, others will run it year round. It used to be the standard was free shipping was the go to because anytime you had shipping it was the number one cause of abandoned carts. I don't necessarily think that's true anymore, but I definitely think there's a dance between offering some type of free shipping like over a threshold or offering flat rate shipping. The point is your price has to be reflective of whatever it is you're going to do and you have to make that message very clear to your buyers. So if you're an E commerce business, the hello bar on the top of your website had better reflect whatever your shipping policy is. Otherwise your customers are going to get that surprise and they're going to abandon things cart when they get to that point in the process. So kind of a side note, but going back, the whole point of number three of seven that we're on is you have to understand your margins and you have to understand how to get there. What is your maintained margin? Your maintained margin is the margin that you average over all of your products over the course of time. So after you've taken discounts and markdowns on your items, you're left with a lower margin. Right. If you've been marking your items down so your maintained margin is the average of all of those. When you have things that are full price, things that are, you know, like a 60, 70% margin and some that are low and they're like a 30% margin or a 20% margin. If you've been taking markdowns, you have to track what that is over time. And this kind of segues into I'm going to skip ahead but not offering blanket sales. Blanket sales are the worst thing you could do for your business, like 30% off store wide because there's no data in that and you're just taking a smooth hit across the board. So when you offer those types of sales, truly you're training your customers that you're a bargain store and they're just going to wait for you to run your next sale or promotion. Sales are strategy and you have to think of sales as strategy. Sales, promotions, events, they're all strategies to get people in the Door to take the loss leader, the item that you're willing to take the markdown on. Maybe you bought it at a smoking deal of a price. You went to the off price show in Vegas, you got something like 30 to 40% below whatever that item's wholesale value was. And then you marked it up your normal three, four, five times. And then you take a markdown on that. So you're still getting like a 60% margin at the end of the day. That's smart. That's how you make money. Right? Because your customers think they're getting 30% off of something, but you're still getting your full 60% margin. Understand where I'm going with this? So then in the sale you're offering that one loss leader item or category or whatever it is, tops, bottoms, fashion, tunics, you name it. And then you're also at the same time marketing and remarketing over here the items that are full price. So the name of the game is you run the sale or promotion to get people in the door. But then it's upsell and cross sell everything else that you have in store. So no more blanket sales, no more just putting everything out there for people to get at a discount. Be smart about building traffic and getting data and upselling and cross selling whenever you run a sale or promotion. Then at the end of the day, going back to number three here, tracking that maintained margin across the board. So number four is there's only three ways to grow your business. Okay? So when you understand these three things, this is the basis for everything that you can do to grow. The first way is to get new customers. The second way is to sell more to your existing customers. And the third way is to grow your margin. Okay? So there's only three ways to grow your business. So getting new customers, we understand what that means. We understand marketing and getting new people in the door. The second way is to sell more to your existing customers, which to kind of segue again. This is number. Where the heck are we on my list? Five. This is number five on our list. Selling more to your current customers, which a lot of people will look at a sale, a product purchase as a one time event, which is absolutely the wrong way to look at it. Because a product purchase, sure, it's a one time event in a sale series of events in that relationship you have with the customer. So you should always look at your relationship with your customers as a funnel. And where are these customers in this process with you in the funnel? Are they in the early stage where they're just starting to get to know you and they're qualifying you as a good fit for them. Are they in that exploratory like I might purchase an item now phase? What comes after that? Right, there's a whole series that comes after that. Upsell, cross, sell, resell. Right. So our email follow up sequences after we make a sale to someone are crucial because we have to continue to build trust and we have to surprise and delight them in the process to keep them coming back for more segmenting. Our email list goes right into this topic. How do we pick out our best customers and keep bringing them back to sell them more and more? Right. So the third way to grow is, is to maintain your margin. So the first way was get new customers. The second way was to sell more to existing customers. And the third way was to increase your margin. So we talked about increasing your margin by understanding the inventory that you have on hand, understanding your turn rate, what sells for you, what doesn't, understanding what your maintained margin is. But now you also have to understand what your expenses are. There's bugs out here. You have to understand what your expenses are. So understanding the difference between an expense and an investment. So there's always expenses, right? There's our normal operating expense and there's staff expense and there's supplies, and there's all these ways that we can really cut down on expenses to increase our margin. There's understanding if there's apps or things that we're using or that we're paying for but we're not really using, or we're not getting the ROI out of those items. What is ROI, you ask? Return on investment. When I give you $10, what do I get in return? Is the value I get in return worth more than $10? That's your return on your investment. So understanding the holes and finding those expenses and closing the gap in those unnecessary expenses is crucial. But in the same breath, understanding the difference between an expense and an investment. I had this conversation with somebody yesterday in Boutique Bootcamp and that was one. What are Facebook ads? Are Facebook ads an advertising expense or are they an investment? I'm curious to know how you guys look at them. So in my opinion, because when you understand Facebook ads and you understand the strategy and you know how to do them successfully, you've tested them, they work for you, which is exactly what we do in Boutique Bootcamp. Once you understand that, then the premise is the more you invest, the more you make. That's not an expense, that's an investment. So the client that I was working with was, can't even talk any more coffee. The client that I was working with was saying, well, I budget X number of dollars every month for Facebook ads. Well, that's all well and good if you only want to grow to a certain level in your business. But you could start like that's your starting place. Maybe I'm just going to spend $100 a month in Facebook ads. But once you understand and you get them working for you, essentially the more money you put into the ads, the more money you get back out. So you keep growing and growing and growing. That's an investment. I look at a membership to the boutique hub, it's $24. To become a member of the boutique hub, that's an investment because you put in $24. But the opportunities for you to grow beyond that and to get money back out of that are endless really. Because you get what you give and you get what you put into it. Whether it's a profile on the site site or discovering wholesale brands and designers and bloggers or service providers on our site or just connecting within the community or the training and the training library that we have there. So again, an investment versus an expense. And I know you guys have lots of things Shopify, same thing. Shopify isn't an expense. Right. It's an investment. So how do you mentally look at those things in your mind, not just on paper. Last thing we talked about one time events purchases are not one time events. Stop having blanket sells and the difference between expenses and investments. So those are the majority of seven tips that I wanted to share with you. Let me just recap in case you're just joining us. So tip number one was besides only a track number grows. Right? Is we have to get organized. We have to start with the intention and to hold ourselves accountable. To understand the data. You have to have quickbooks. You have to have a date on your calendar to manage the income and to manage the expenses and to understand what those actually mean for your business. Because only the track number grows. Number two is we have to understand what's selling in our business by class and by category. We have to break down what inventory we have on hand in each of those items. What is the turn rate, how fast are we selling through those items in each category? Right. How old is the stock that we have on hand in each category and what are we left to purchase after that? Which segue? We didn't talk about this, but when you're talking about the inventory that you have on hand, aging is Important. But also if you have a goal to sell $10,000 in a certain category one month, but you don't have at least that amount of inventory on hand to sell, you're never going to get there, right? So knowing those inventory levels are crucial because you can't meet a goal if you don't have enough inventory to be begin with. And if you're just about out of stock, if you're turning something really fast and you haven't reordered that item, that's leaving you a gap. You're leaving money on the table. So start by understanding those different categories in your business. Number three was understand your margins. If you're not marking up at least two and a half to three times, you don't have a business because that's not sustainable. So understanding how to mark up, understanding what your maintained margin is over time. Number four was growth only happens three ways. New customers, selling more to current customers and increasing your margins. Number five is stop having blanket sales, for the love of God please. Because it's only hurting your business. Be smart about how you use sales events and promotions to attract people into your business. Number six, sales and purchases are not one time events, right. But they're a series in your funnel. Number seven is knowing the difference between expenses and investments. So you guys, I'm really excited to share these tips with you. Hopefully you got something out of it. If you have got questions, I'm gonna check them out below and get to them here in just a second. But the kind of parting thought and parting note I want to leave you with here is I hear a lot of you talking about your goals to have a more successful business. Right? Everybody has that goal. They want to grow to a certain number by a certain point in time. But a goal is just a wish if we don't take action on it. So put your money where your mouth is and start taking action and holding yourself accountable in your business. To actually get into the data, dig into the numbers because only a tract number grows. So I see there's a couple of questions down below. Maybe, maybe not. If you do have questions, make sure to ask them. Otherwise I'll be over in our members only group today talking about this very topic. So for those of you who are still watching, we have a live video, our boutique chat happening at 11am today. We have a guest to come in and talk exactly about what I just talked about. We're going to be talking about merchandise planning. We're going to be talking about tracking your numbers and understanding not just what's open to buy. But how do you plan this out in each category in your business? How do you become more successful by looking at the numbers and the data in your business. So 11am the boutique chat happening today. I'm really excited to have spent this time with you guys today. Thanks again for watching again. If you're new here, I'm Ashley with the Boutique Hub and can't wait to be back with you live again. Hope you guys have a great rest of the day. Bye guys.