fbpx
 

March 31, 2015

And when it’s crucial to be able to obtain equipment and fixtures—often to get revenue flowing in the first place—every pet retailer needs access to a source of capital that understands his or her needs and can be flexible enough to work through unpredictable circumstances.

But every retailer also has to understand that access to capital does not mean success or prosperity when it comes in the form of debt. It just means you can operate today. It gives you a shot at long-term success but until the day comes when you retire your debt and operate out of your own positive cash flow—with some left over for yourself—you’re not at the goal.

So with that in mind, what issues do pet retailers have to consider when choosing a finance strategy? Here are a few:

When deciding whether to lease or buy real estate, pet retailers need to consider both the short-term monthly payments and the risks involved with fixed or variable interest rates. Commercial real estate is not guaranteed to deliver a profit upon future resale but owning your own building does provide more flexibility in terms of possible expansion and remodeling options. When you buy, be careful about variable interest rates that are low at the start but could be increased significantly over time. A fixed rate may be higher at the outset but can prevent surprises and you can always look into refinancing if rates go down.

Equipment and vehicle leasing are options for retailers who want to avoid the major cash layout associated with large purchases. Leasing can give you quicker and easier access to the things you need but pay close attention both to the interest rates and also to the terms. Many small business owners regretted the decision to sign four- or five-year equipment leases when their needs changed and the deals no longer made sense for them, especially when the terms of the lease did not allow a way out. Remember that lease payments become a part of your overhead, often for lengthy periods. Be sure you’re not adding more to your overhead than you can manage if times get tight.

Financing your inventory may be necessary while you’re getting established but be careful about the debt you incur doing this. It makes good inventory management all the more crucial because you’re still on the hook for the cost if you discard the inventory. Ideally, you want to work with a finance source that understands the nature of your inventory and the possibility that your revenue will see seasonal adjustments.

Certain costs are easier to control than others, and personnel costs are near the top of that list. That’s why many businesses often respond to falling revenues by slashing payroll. It might not be the best strategy but if overhead is locked in and inflexible, it may be the only strategy available. The wisest long-term approach is to examine your overhead before you commit to it, and, as much as possible, avoid overhead obligations you will not be able to get out of in the future.

Of course you need a facility and you need to turn on the lights, so separate the absolute necessities from other things and ask very hard questions about whether a particular need has to become part of your overhead.

People will always need things for their pets, so forming strong customer relationships can help ensure your ability to generate revenue over the long term. Wise decisions about how you manage your costs could therefore make the difference between prospering and just getting by on a week-to-week and month-to-month basis. It’s hard enough to predict the money you’ll be taking in. You don’t want the money you’re spending to be just as unpredictable, and that starts with finding the right finance partners and getting their help to make good decisions about what you’re spending and how.

Share This Story On:

Digital Guide

CBD Trends

This digital guide provides valuable information on the subject of CBD, including content on dosage and the importance of being fully transparent about the product’s origin

Dog & Cat Needs

With dogs and cats being members of the family, there's vital information to know in order to serve their pet parents.

Pet Nutrition

Discover how science, technology and pet owning lifestyles are changing the industry.

Enews Subscribe

19737
close
Subscribe To Pet Age
Sign up for the weekly e-newsletter, print magazine and more. Sign Up