Ciara Stockeland teaches small business owners how to pay off their debts . It's a personal mission for her, because she was once in debt too.
Stockeland once owned a designer outlet boutique in North Dakota and grew it to 13 locations — despite not being able to pay herself regularly. It all fell apart after 11 years. Then she started a subscription box business , zeroed in on her data, and was profitable immediately. It sold within 18 months.
Those two experiences crystallized something for Stockeland: Business owners often "manage margins with emotion," she says. Now she's a consultant and fractional CFO for inventory-based businesses, and teaches people how to keep feelings like guilt and fear out of profit decisions. Here, she explains.
Related: How to Know If Your Business Is Profitable This Very Second
Image Credit: Zohar Lazar What's the most common problem you see among clients?
They don't understand that margin is what profit is created from. When I get on a call with someone, I'll ask, "What is your margin right now?" They'll say, "Oh, I mark up my product three times, two times, four times." If you buy something for $5 and you mark it up to $20, but you have seven and you only sell one for $20, and then you sell three for $15, your overall margin is not your markup.
In those cases, many entrepreneurs might just be counting their overall revenue.
Top-line revenue is a vanity metric. Top-line revenue is an easy way for us to compare our perceived success, so that's how we usually set up and grow our business. That's what I did, which was part of my issue. I didn't understand that I couldn't afford to make the million dollars that was coming in every year. My product cost me too much, I had too many people on my team, and it left me with nothing.
Related: Find Ways to Compete When Margins Are Razor-Thin
How do you take emotions out of inventory planning?
Slow down your decision-making. You're super excited about bringing in this new line — but slow down. Take a look at the data, check if it makes sense, and then make a decision. Entrepreneurs can make decisions very quickly , which is what makes them successful, but it can be their Achilles' heel.
Many entrepreneurs struggle with pricing their products. How do you help with that?
First, with our profit-plan template, I show them why we need to work on pricing . Once they see how the pricing directly affects their take-home pay and/or savings and/or debt payoff, we decide what to change. We rarely change the pricing of everything, but I'll let them decide on the lowest-hanging fruit and start with that. Then we decide how much to increase, and we usually see resistance — out of fear. I'll have them start small, as low as marking up everything by $1. If we have a lot of price-markup resistance, I'll also help them find other ways to increase margin, through off-price buying, bulk buying, etc.
Are business owners holding on to products that aren't profitable because they represent their "vision" for the business?
Yes, they totally do! So I always show them the data — what certain product lines are doing to their bottom line. Then I assure them this doesn't mean we will eliminate everything they love. Often it's just about finding the right mix of what's high-margin and what they love! The right mix can create a much better end margin.
Related: Your Business Might Not Actually Be Profitable. Here's How to Fix It.
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