Budget game, continued. Wonky.

The following entry, (after the *****'s below), was written on Saturday. After Sunday, it became a moot point. I'm not doing any discount orders until the 19th of this month, at the earliest, and only if I reach a very high level of sales.

I was really steaming along in the first 6 days of the month, 25% higher than projections, then had a lousy day yesterday. One of those days I wish I could've stayed home. Sundays are so unpredictable. I can do a couple of small days, and then suddenly have a huge day. I just never know.

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The way it's working out, I can't make anymore "Appreciation Sale" orders until Tuesday at the earliest. So that gives me a few days to see if the really good days I've been having continue.

I can't order from most of my suppliers for July until my credit card turns over sometime next week, so again, I have enough time to gather information and make allocations. If I come up short over the next few days, I may make the "Sale" order on the 19th, but only if I am significantly above projections.

I joked about finding a loophole in the budget, but it was always there, if not expressed. The reason is, the total retail of my orders are going to be below what I need to get to projected sales. That is, my markup from the product ordered falls about 20% short. I'm depending on the increased margins from 'sale' product and the usual summer diversity. (Stuff that doesn't sell most of the year, sells at Summer and Christmas because it's exposed to more outsiders....stuff that doesn't have to be, or can't be, replaced -- thus giving me a 100% profit margin.)

But it was always going to be a tight fit. And if sales were significantly higher than projected, I knew that my budget wouldn't be sufficient. So I made a deal with myself that I would spend half of the excess on the budget, thus keeping the same margins. That extra would be applied to the following month.

Where I may weasel out would be to use the full amount of the excess on product; which would leave me with about the same overall profits I originally planned. And to spend it within the same month, as long as I'm pretty certain I'm going to get to the overage.

I know, it's confusing. Without using real numbers, it's hard to explain. It may be a little clearer with made up, proportional numbers:

Say my margin is 50%.

Say my sales projection is a 10.

Say I'm ordering at a 4.

Obviously, double 4 doesn't get us to 10.

But it does if a significant proportion of the total is inventory that doesn't have to be replaced, or that was purchased at higher than 50% margins.

I think I can do that.

The problem increases, however, if I sell at over the 10 level, say a 12. Unless I take at least 1 of those points and apply it to my budget. So the 4 becomes a 5.

Or, as I'm planning, spending the entire excess, thus the 4 becomes a 6. Thus maintaining both margins and profits. Actually, I make the margin a more realistic 50% again, and still end up with an extra point. If I could pull that off, I'd make more profit, and yet have even more product at the end.

Does that make any sense?

But I'm somewhat gambling that the current sales will continue at this pace. That the 12 actually becomes a 12, instead of a 10. Because if I spend a 6, and it comes in at 10, I've wiped out all profits.

So the trick will be to delay as long as possible to get a good read, and yet not so long as to miss the opportunity of the 'Appreciation Sale."

Chances are good. After all, Summer business doesn't really start until the second half of the month. Normally I'd be expecting an increase, not a drop, but if we can even maintain the current sales it's good.

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O.K. I think I really need to use real numbers here, even if they aren't my actual numbers. (Real/fake numbers? Fake/real numbers?) If I was writing this for publication, I'd probably delete the above "proportional" example, and substitute the example below. But, hey, if you're with me this far, you're a glutton for punishment. I know MY eyes would glaze over.....

Examples, we'll call them.

Case study examples.....(Note: I may have a few math errors, here. As my C.O.C.C. business adviser said, I have a "primitive sophistication" when it comes to numbers.)

So, for the sake of illustration, let's say that my sales projection is $10,000.00. I want to make clear, my sales are much higher than that or I wouldn't be surviving in downtown Bend, but 10,000.00 is a nice round number.

Through the course of the year, I strive mightily to keep my profit margins at 40%. That is, for every 10.00 worth of product, 6.00 is Cost of Goods (C.O.G's) and 4.00 is gross profit.

40% pays my overhead, plus a small profit.

Most of my buying is at about 45% to 50% margins, meaning that 5% to 10% is added to inventory, wasted, discounted, or destroyed.

My goal this summer was to raise my operational margin to 60%. I was going to do this by trying to maintain evergreen inventory, selling off non-evergreen inventory, and buying as much viable discounted product as possible.

Mostly, to be blunt, I was going to do this by sticking strictly to a 40% budget. I was going to spend 40% of what I considered a very conservative projection.

So, let's say that projection is 10,000.00.

That gives me 4,000.00 to spend on C.O.G's. Like I said, I'm hoping to make the sales level I want through turning 1,000.00 of that 4,000.00 into 4 times the product.

3,000.00 at 50% = 6,000.00 in sales. 1,000.00 at 75% = 4,000.00 in sales. Total 10,000.00 in sales.

If I do 12,000.00 in sales, my spending won't be sufficient to keep up the inventory. Therefore, I intended to spend half 1,000.00, to keep it up. Or 1,500.00 if I do 13,000.00 in sales, and so on.

But if I spend the full amount of the extra, say the 2,000.00 extra at the 12,000.00 projection, and I spend it all on legitimate discounted product, I can turn that 2,000.00 into 8,000.00 in inventory, which actually increasing the likelihood that I'll hit the higher projections and actually increases the inventory at the store, hopefully helping out the next months.

But...it's a gamble to do it before the fact.

My dilemma, as usual, is that the deals are available now, not later.

For me to take the chance of waiting for the 19th (much of the product will be gone) and to set such a high standard, is showing great discipline on my part. At least, compared to my past behavior.

It really, really hurts to let it pass. But there it is. Now is the time to stick to my guns.