What’s the number-one cause of small business failures? Poor cash flow.
Unfortunately, tobacco shops are even more vulnerable to this threat. You have to contend with high taxes, changing smoking habits, and constant regulatory changes.
But there’s good news: A data-driven approach to managing inventory, pricing your products, and marketing your tobacco shop can help.
In this blog, we’ll share everything you need to know about how to manage cash flow in your tobacco shop. Keep reading to learn three simple steps to establish your shop’s financial baseline — plus four common cash flow challenges and how to tackle them.
Let’s get started!
“What gets measured gets managed.”
This phrase is as common as it is true — especially when it comes to your tobacco shop’s financial health.
That’s why the first step is to establish a baseline for your tobacco shop’s current cash flow. Let’s look at three essential steps to measure your incoming and outgoing cash.
First, you need to know how much it costs to keep your tobacco shop running.
There are two tools we recommend for monitoring your outgoing cash: accounting software like QuickBooks and a point of sale (POS) system with powerful reporting and analytics capabilities.
These software solutions can help you track:
When you know exactly where your money is going each month, you can take action to reduce operating expenses and generate more revenue.
You also need to know how much money is coming into your tobacco shop.
Your POS system’s sales reports are the best way to track incoming cash.
Along with a general overview of your daily, weekly, monthly, and annual revenue, these reports should give you an in-depth understanding of your sales trends. For example, you can identify:
This data reveals your tobacco shop’s overall financial health, and it helps you tailor your product selection, marketing approach, and operating procedures to your customers’ unique shopping habits.
Related Read: How Much Does a Smoke Shop Make a Month? 5 Key Factors
You’ve studied your expenses and revenue — now it’s time to use these insights to improve your tobacco shop’s cash flow.
Investigate where you’re losing money. Here are a few examples of common culprits behind poor cash flow:
If these problems sound familiar, don’t worry: We’ll share exactly how to tackle them in the next section.
Related Read: 4 Smoke Shop Business Challenges [+ How To Overcome Them]
Ready to transform your tobacco shop’s profitability?
Let’s look at the four challenges that might be dragging your business down — plus specific, expert-recommended ways to address them.
Let’s start with one of the simplest problems: low customer retention.
A new customer might stop by your shop for a pack of cigarettes or a disposable vape — but they don’t come back. This scenario means high marketing costs, low average basket size, and stagnant foot traffic.
So, what can you do to turn these one-time shoppers into loyal customers with high lifetime value? Here are our top tips to increase tobacco shop customer retention:
A POS system with built-in customer loyalty management, SMS marketing integration, and inventory management tools can help you bring these strategies to life.
Related Read: Tobacco Shop Marketing: A Quick Guide
Falling foot traffic is a major concern among tobacco shop owners — especially as smoking declines among consumers of all ages.
However, there are a few ways you can overcome this trend and bring new customers through your door:
Keeping an eye on tobacco industry trends and adapting to them will help you future-proof your shop and maintain steady foot traffic.
Poor inventory management can be a huge drain on your tobacco shop’s cash flow.
If you don’t stock your shelves strategically, you could have thousands of dollars tied up in inventory that isn’t selling. This financial squeeze might prevent you from restocking your bestsellers, driving you further into the negative cash flow loop.
The best way to address this problem is to prevent it in the first place through accurate inventory forecasting.
Rely on your POS system’s sales reports to inform your inventory ordering approach. For example, Cigars POS ranks each of your products from A to D, helping you understand which are worth reordering in large quantities and which you should deprioritize.
Even with the best inventory forecasting, you might still end up with deadstock. Instead of letting cartons of cigarettes and e-cig cartridges gather dust, offer strategic promotions to move them.
Mix and match or buy one, get one (BOGO) deals are great ways to increase your average basket size and promote these unpopular products.
Free Resource: The Essential Guide to Smoke Shop Inventory Management
The right pricing strategy is critical for tobacco shop profitability.
Many tobacco shop owners worry that setting too-high prices will drive customers away — but undercharging for your products makes it impossible to turn a profit.
Instead of setting prices that seem right, take a data-driven approach. Use your POS system’s reporting and analytics suite to:
Relying on the data ensures you turn a profit on every single product in your tobacco shop — no guesswork required.
Ready to ditch the financial stress and boost your tobacco shop’s profits? We’re here to help.
Cigars POS is an all-in-one POS solution specifically designed to help tobacco shop owners like you manage inventory, retain customers, and make more sales. Our powerful software includes all the features you need to run a successful shop, including:
Talk to one of our tobacco industry experts and see these features in action by scheduling your personalized demo today!