Retailing Tips: Allocating Post-Holiday Cash

Reinvest While Driving Down Debt

By Adeena Mignogna
January 2009

“I think about making physical improvements, like shelving, lighting, landscaping.” — Danny Givens, Little Dickens

In my retail store, there were several holiday seasons where sales exceeded our expectations. If you don’t have a plan for this situation ahead of time, you can find yourself spending wildly and blindly — to the detriment of your business. While not every retailer is flush with finances come January, more than one-third of 52 retailers surveyed told

TDmonthly Magazine they hit or exceed holiday expectations, sometimes by up to 25 percent, at least half of the time, or have done especially well the past few years. The majority who budget well and stick to their previous year’s plan are likely to see growth and find themselves with a little extra cash after the holiday season.

What to do with that extra money? Here are some suggestions:

1. Order Merchandise. Most retailers said the majority of extra cash goes back into inventory, replenishing sold-out items or branching out with new products. “We like to have different items for our repeat customers,” said Gwen Bowden, manager of Doodlehopper for Kids in Springfield, Va.

2. Spruce Up Your Shop. A reinvestment can be anything from an increase in advertising to making physical improvements to the store and fixtures. “There will be small improvements here and there, like to our sound system,” said Merrick Smith of Piccolo Mondo Toys in Portland, Ore., who wants to give customers the best experience when they come in to shop. Nearly 20 percent of the retailers who spoke with TDmonthly agreed that reinvesting money into the business, for physical improvements or other purposes, is the way to go.

“I think about making physical improvements, like shelving, lighting, landscaping — something that's an advantage to the store,” added Danny Givens, owner of Little Dickens in Lynchburg, Va.

3. Pay Down Debt. Start with high-interest debt, such as credit cards and lines of credit. Joe Berardoni of Pun’s Toy Shop in Bryn Mawr, Pa., told TDmonthly that “any surplus is used to pay down our line of credit.” Paying debt now saves you money in the long run since you’ll wind up paying less interest.

4. Give Bonuses. Eight percent of the retailers surveyed told TDmonthly they issue bonuses with their extra cash. Bill Sartain of Tutoring Toy in Salt Lake City, Utah, said they “always try to give ourselves a significant buffer as well as bonuses for a thank you.” You and your employees work hard, and showing appreciation helps everyone feel good about the New Year and your business.

5. Save For a Rainy Day. Now is the time to build up the savings cushion. Things are good, but they can turn bad at a moment’s notice. The water heater could go out, there could be an unexpected bill from the landlord, or something else might require emergency cash. Any cash that wasn’t included in a budget before hand should be put away. Looking back on my own business, this is exactly how I should have handled the extra money we had during the good years.

If you find yourself with extra stock instead of extra cash, take a look at "Retailing Tips: What to Do With Stock That Won't Move."