Maximising small business profitability at Christmas

The Christmas season marks not only the peak sales period for the retail industry each year, but plays a significant role in shaping the 12 months that follow. The latest Xero Small Business Insights show just how prepared businesses are. The number of retailers who are cashflow positive – a key measure of profitability and potential for survival – has been rising in recent years, while the number of late payments to all businesses continued to fall during 2017.

Over the past several years, the number of smaller retailers with positive cashflow has ticked upwards as businesses bring in more cash than they spend. A total of 61.1 percent of retailers were in the black as of Christmas 2016, far above the 54.6 percent of all Australian small businesses, a sign of retailers’ relative financial health compared to the rest of the economy.

Here is our advice for small-businesses retailers to help them maximise their profitability this Christmas:

  • Use your data – Many retailers collect a lot of data in their day-to-day operations but don’t fully use it. Look back at previous years’ operations to see what sold well (and what didn’t), your stock and hiring levels, and profit margins across the business, in order to make more informed business decisions.
  • Know the full cost of hiring more staff – Hiring Christmas casuals can be significantly more complicated than just employing hired hands. With more staff comes significantly more admin. Make sure you consider the full costs of hiring staff, including penalty rates and additional payroll admin, to ensure your business can cope.
  • Beware of discounts – Unsold stock often leads to heavy discounting following Christmas. Boxing Day sales can seem like a great idea to clear stock but it’s not always a wise move. Make sure any discounting is based on a sound pricing strategy and doesn’t trade profit margins for a quick buck.

Trent Innes, Managing Director, Xero Australia

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