Stop Worrying about Sales and Start Thinking about Profitability | EP 153

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Does it feel like you are making good sales, but nothing is left in your bank account at the end of each month? Are you bringing in enough revenue to cover your overhead and pay your employees but can’t pay yourself? I’ve been there. If you’re a small business owner, you’ve been there, too. 

It’s time to change how we think about sales and profitability. And I’ve brought the perfect person to the podcast to help us do just that. In this episode, Ciara Stockeland, fractional CFO and inventory genius, joins me as we get to the simple truth about inventory, margins, and profitability.  

Ciara is a 3rd generation entrepreneur from North Dakota. She opened her first retail store in 2006 and built it into a franchise before selling it. She also started a subscription box for retailers, grew it, and sold that, too. It was Ciara’s love for all things numbers that led her to her current role where she works with business owners to identify and fix their inventory, cash flow, and profitability issues. 

Ciara has met so many inventory-based business owners who all ask the same questions: 

• Where is all my money going? 
• What do I do with all this debt? 
• How much inventory should I really own? 

Ciara responded to a need and built her Inventory Genius course where she teaches business owners how to focus on the right things in order to create more profit and keep more cash. 

I’ve seen it so many times - business owners who make a million dollars or more a year yet don’t have much in their bank accounts. Others struggle with debt despite high sales numbers. 

The problem isn’t a lack of sales - the problem is with their cash flow. 

The good news? This problem can be fixed. The solution starts with identifying the root issue. What’s causing the cash flow crunch? What numbers do you need to lean into and how does your inventory play into your cash flow situation? 

Ciara teachers there are 3 levers we can pull: 

1. Margins 
• Increasing 2-3 points can make a HUGE difference 
2. Operating expenses 
• Write down every penny that leaves your business
3. Top-line revenue
• Look at this last 

You need to build a business based on profit goals, not revenue goals. 

Set profit goals using Ciara’s framework - the same framework she uses regardless of the size of the business: 

1. Look at your margins
2. Look at your expenses
3. Fill in your sales goals
4. Look at the bottom line - what will that produce in profit? 
5. If you’re not happy with the profit, go back and pull those three levers until the profit you’re projecting can give you the income you want and cover your debt. 

I want you to understand that subscription box businesses can be profitable from month one - but you have to be disciplined about operating expenses. 

If you don’t fix a problem with operating expenses, gaining more subscribers won’t solve the problem. The cost will grow right along with the subscriber numbers. 

Ciara and I also talked about inventory issues for businesses that sell one-off products. 

Business owners often ask, “Should I buy wider or deeper?” 

Ciara recommends looking at your inventory by category and answering the following questions: 

• What is the margin? 
• What is the turn (calculated by the average wholesale value/cost of goods sold)

Your goal is to turn and burn. Think of inventory as dollar bills on hangers, on shelves, or in drawers. It doesn’t age well. 

You need to be an extreme editor - avoid emotional attachment to inventory and liquidate it regularly. 

Ciara recommends getting into a rhythm for liquidation - twice a year, annually, or quarterly - whatever works best for your business. She also recommends working with people who broker with liquidators. They can help make the process run more smoothly and help you get rid of one-off items and excess subscription box inventory. 

It’s important not to be attached to what you paid for the inventory. Realize you’ve made your margin on the items that went to subscribers - don’t worry about not making the same margin on what’s left over.  

When you get diligent about knowing your numbers, it gets easier. 

Get Ciara’s book Inventory Genius for an explanation of the numbers in your business. 

• What is profit and loss? 
• What is a balance sheet? 
• How does inventory play into what’s happening with my cash? 

Problems with inventory, cash flow, and profitability will not solve themselves. But they ARE solvable! It starts with understanding the numbers in your business. 

Knowledge is power. The more you know, the better decision you can make. We want you to love your business and to make decisions from a place of certainty, not panic. 

Don’t forget to grab Ciara’s FREE eBook HERE! 

Join me and Ciara Stockeland, inventory genius, as we get to the simple truth about inventory, margins, and profitability.  Grab your earbuds and notebooks, and join us!

Find and follow Ciara: 

• Inventory Genius on Facebook
• Inventory Genius on Instagram  
• Ciara’s FREE eBook
• Ciara’s Website