Cash Flow 101: Part 4, Operating Costs

Syama Meagher is the CEO of Scaling Retail a retail strategy firm that specializes in small to medium sized retailers and brands. We have invited her to share her knowledge about running a successful brand in a weekly series focused specifically on Cash Flow. Join us each week as she guides us through how to create an excel sheet that will become the foundation of your finances.

To start from the beginning, check out her first post here. If you would like to be notified when a new article is posted, please sign up for our newsletter to the right.

Each week we are diving into the nuts and bolts of how to build a useable cash flow projection. This isn’t a stagnant plan that you create once and then leave to collect dust, this is meant to guide you each month in assessing your projections with what actually happens.

Follow the series here:

Week 1: Set Up of your MS Excel Workbook

Week 2: Sales Projections

Week 3: Marketing Projections

Week 4: Operating Costs (we are here)

Week 5: COGS

Week 6: The Master Tab

This is section is where you will begin to answer the big questions: can I afford to operate my business this year? How much do I need to sell to break even? It takes most brands a minimum of 18 months to see traction on their brands. That’s selling for three seasons! So make sure you are making the correct investment to help position yourself for growth.

Operating costs are all the costs that you will spend on running your business each month. Start by creating two sections on your Operating tab. One for fixed costs and one for variable costs. Fixed costs are the items that you will spend on your business no matter what. This includes, but is not limited to: phone, rent, bank charges, Internet, accountant, lawyer fees, office supplies etc. Your variable costs are costs that don’t have to occur monthly and can vary month to month. These will be the costs from your marketing and sales tabs as well as any travel, packaging, shipping, branding agencies, consultants, lawyers, employees or other outsourced work that isn’t essential to run your business.

Keep your production costs aside as these will be included in your COGS tab. It may be discouraging to look at operating costs, but to be honest these are probably costs that you have already been spending, and maybe not tracking 100%. Click on image to view larger.



The operating costs for each of your businesses will differ depending on what networks you have access to. Once you have your lists of costs, it's time to start evaluating your resource partners, friends, and networks. This is how you will cut costs down each month and year. I suggest you start by making a list of who you know and what they can do for you. Then rank this list by how close the relationship is. Next, figure out what you could/can do for them. The higher your ability to trade something of value, the less you might need to spend. I’ve seen brands pull off agency like photo shoots for less than $2,000 and entire sales kits produced for free. Just remember, if you leverage your networks to get things done put aside the right amount of time. There is a tradeoff between time and money and if you plan correctly and in advance you can save money.

Lastly, your costs to operate will be largely based on your revenue generating strategies. If you launch ecommerce and have a strong digital marketing plan, then those costs and metrics for success will be different than those who launch wholesale and need to focus on tradeshows and sales pitching to wholesale buyers. As discussed in the post on sales and the post on marketing, you own the direction of your business. Whatever your goals are they need to be planned out so you can stay the course and pivot when needed.

This approach taken to planning out an actionable cash flow model is part of my philosophy on the NEW business plan. Small business owners need to step outside the framework of writing stories about how they are going to get things done and work on steps that get them results. Looking at your business from a 360* perspective, as we are doing, will help you do just that.

See you next week!

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