A Pew Institute report confirms this notion. 4 out of 10 Americans do not save cash.
This perspective describes consumers, rather than small business owners. But many small business owners are consumers, and that non-saving tendency is why setting aside the consumer mindset when launching a business is critical. Businesses need to think about how they spend on items within the business that reduces their capital or ties it up too much into an asset.
The rise of BOPIS (Buy Online Pay In Store) and BORIS (Buy Online Return In Store), in which customers shop at home and then pick up their item (or return it), are another reason business need to think about their spend more critically. Customer transactions are occurring faster, with digital options such as paying online at a portal and mobile payment readers from Square, Paypal, and other providers. The faster rate means businesses must think about how to time their revenue and payments and ride herd how cash is flowing in a business over time.
A lot of times business owners try to purchase items for availability rather than examining how those items are really used in daily operations. Having assets sitting around is bad, but so is not having those assets to provide a product or services to customers. Striking a balance between scenarios is not easy, yet business owners must be wary of having too much capital tied into an asset. Doing so can prevent a owners from making strategic decisions with cash quickly.
The current decline with Sears is a great example that small businesses can learn from. Much of Sears’ parent company invested into real estate owned by the stores rather than the operations or products/services that Sears. While real estate is valuable, it requires upkeep to be made valuable and it can not be sold as quickly as stock. That can make converting into cash difficult to do, especially when time is limited to make a deal or purchase.
Ultimately businesses must figure out a number of ways of saving cash within the business, so that options become better. One factor that must be kept in mind is making investments that customers ultimately see and feel when engaging a business through its products or services.