Are you fighting the same retail fires over and over? Most independent retailers know exactly where the pain is—whether it’s inventory bloat, payroll headaches, or customer service friction—but they often struggle to move beyond these visible symptoms to address true operational challenges. While opening a shop demands product passion, sustaining it requires shifting from a consumer mindset to one of financial mastery and executive decision-making. In this episode, Gwen Bortner and Tonya Kubo wrap up this series on retail mastery by tackling the root causes of the biggest challenges facing independent business owners today. Learn how adopting a true owner mindset can rescue and revitalize your business.
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The Real Problem Isn’t Inventory Or Payroll
Over the last few weeks, Gwen and I have been talking about inventory. We’ve talked about payroll. We’ve talked about customer service. If you’ve been listening closely, you have probably noticed something. Gwen never treated any of my questions as the actual problem because, after years of working with independent retailers, one of the things that she realized was true in her conversations at h+h Americas is that most retailers know exactly where the pain is. They know why they’re frustrated.
They know what’s costing them way more than they can afford. They know what’s keeping them up at night. Most of the time, they are trying to solve symptoms instead of root causes. We are going to wrap up this series by talking about what Gwen believes is the real challenge facing many independent retailers and why this skill required to open a shop is not the same as the skill required to build a sustainable business. Gwen, take it away to drop your knowledge on us.
Context matters here because depending on who you are, you’re going to have some different pieces. The majority of the people in the world who decide they want to open any type of independent retail business do it because they love the thing that that business supports, whether it’s a craft. They love clothes. They love how they look in clothes and how they’re really good at helping other people look amazing in clothes. I do not care what kind of independent retail it is. Very rarely. I cannot even imagine a really good example, quite honestly. Does someone say, “I do not actually like shoes, but I’m going to open a shoe store,” an independent shoe store?
Shifting From Consumer to Retail Owner
I may open another Payless Shoe Store as part of a franchise. That’s a different thing. I’m really talking about independent retail here. The skill of understanding the product is the things that were only a small piece of the overall equation of actually being a business owner. I’ll say what I see my clients assuming is that that part’s going to be easy enough to figure out. It’s just numbers. We just do things.
Every business is this. There’s this big assumption like that cannot be that hard because it’s very logical. To some degree, that’s true. If you do not actually understand the business side of the business, you’re going to be fighting an uphill battle because the product knowledge is actually a really small element. It’s not about what we buy, but it’s about understanding the quantities and when and the cash flow and all of the other things.
Understanding the Financial Reality of Solo Ownership
It’s not about do I need people? It’s like, can you actually get the right people doing the right thing for the right reason and motivating them in a way that is supportive and follows all of the rules of whatever state you happen to be in? When you’re an independent retailer, it’s not like you get to have a staff where you’ve got your HR expert, and you’ve got your finance expert, and you’ve got your buying expert. That is not realistic. You are all of those people.
Product knowledge won't save your retail store. You've got to master the business side if you want to survive. Share on XIt’s like I always say. Before I became a service provider, when I was working for somebody else, toward the end of my career, I had people, and it was a rude awakening when I had to wake up one day and realize I was people.
You are all the people. The thing is, we have to be all expert people. Most of us are not already expert people in all of these things. We usually are experts in maybe one or possibly two of the areas that we need to be experts in.
What you’re saying is it’s like I was prepared to be the person who had to send out the emails. We had somebody who did that. I wrote the words. They sent out the emails. I was prepared to be the person who had to figure out how the email marketing system automations work. I was not prepared, though, to be a bookkeeper and CFO. You didn’t just bring in money, pay bills, and give yourself the rest. I didn’t know you were supposed to set money aside for when it’s time to replace the computer or pay taxes. I just thought the tax bill came, and I do not know, you just came up with that or something. I really did not think that deeply about it.
That’s the piece. I’ve heard this so often. It’s like, “I got into this because I wanted people to get good quality products of this type, whatever this type is in our community. There was nobody else who did it. I didn’t get into this to fight with HR. I didn’t get into this to respond to one-star reviews. I didn’t get into this to figure out sales tax and the difference in how I pay taxes for my online sales versus my in-person sales.” Yet, correct me if I’m wrong, I do not think you can opt out of those things.
Very few of them you can actually opt out of. There’s occasionally one or two you might be able to, but it’s a pretty small list. Early on at least, you’re usually not at a place where you can opt out by hiring someone who is the expert because often it’s a financial issue. The other is bringing in someone to be the expert when you do not actually know enough to know if they’re doing it well is also problematic.
I’ve seen that happen in a number of businesses where we brought in a bookkeeper because I do not know about finances, and your bookkeeper is doing a really bad job. They have no idea that they’re doing a bad job because they do not know enough to ask the questions to know if they’re doing a bad job. As an owner, you have to do the bookkeeping, but you need to understand it well enough to know that you’re actually getting the information that things are happening in the way that they need to happen.
On the other hand, sometimes people get lucky, and it’s like, “I was hired there, and they’re amazing.” That’s great. I love that for people, but it’s still luck. If they leave, you’re probably not going to get lucky twice. That’s also been my experience. When you hire a unicorn, you usually do not find another one.
Without disclosing anything that is private or sensitive, most clients come to us because they started their business, and they got in over their head somewhere. They were trying to learn the business as they went and realized they were, like, in over their head, and then they come to you or ask for support. What is it like when you take all those experiences, what is it that you’ve seen happen when people are trying to learn that business side after they’ve already opened their doors?
Every entrepreneur is doing that to some degree. It comes down to how much other experience you have to put into the pot. Some folks have a lot, some folks do not. Some folks think they have a lot because they have very good experience in an area or in a role that they think has prepared them. That’s often where we’re seeing the problem is “I’ve worked in corporate America for a really long time. I understand how businesses work. I’ve been at the top level,” and it’s like, “Were you the one actually having to manage the financials?” “I managed a budget.”
That’s a different process than managing the cash flow of what’s happening. That is where this becomes a challenge. I’m not going to tell you that you have to know everything before you start a business because that just isn’t the way it ever works. If you did that, most people would never start. Let us be realistic. That’s just not what happens. What we are afraid to own is all the things that we really do not know. We make choices, and often we’re making choices based on what other people in the industry are doing.
Now, it’s fine if you’re actually in pretty intimate conversations with those people so that you really know what they’re doing as opposed to getting the Instagram version of what they’re doing, which I think is what happens a lot. It’s like, “Someone’s so successful, they’re doing this.” It’s like, “Are they? Do you understand what their whole business model is behind it?” It’s up until a point where all of a sudden it’s like, “I cannot keep doing this. I’m exhausted. I’m running out of money.” There’s some tipping point that says, “I cannot keep this going. I do not want to kill the business.”
That is the tipping point. Sometimes it’s people, sometimes it’s money. Sometimes it’s energy. Sometimes it’s a combination of multiple things, but the piece that they’re good at, they probably expanded some skills in the areas that they’re not quite as good at, but are adjacent, but there are usually some skills that are just getting completely overlooked. Often that’s where the root cause is, although it manifests over in the areas that they’re more familiar with, because that’s where they’re looking. It’s not that they are not manifesting over in this other area. It’s like, but I’m only looking over here. That’s the only place where I see the problems.
It reminds me. When I was much younger, I worked at a newspaper that was across the street from a coffee shop, and it was a delightful coffee shop. The owners wanted to move out of town. They wanted to move elsewhere. They were selling, and it was for sale for a while. Of course, everybody who worked at the paper. I went in and at one point after a few, maybe 3, or 4 weeks, I asked, “I haven’t heard much about the sale. How’s that going?” There was nobody in the shop at the time, and the owner said, “I’ve got a lot of interested folks, but I’m trying to make sure that whoever I sell to actually has the opportunity to succeed here.”
He went on to just share that they had a great location downtown. They were really an active part of downtown. He wanted to see that piece continue. He felt like he owed it to downtown to not just sell to the highest bidder, but to sell to somebody who really had what it took. I was like, “What do you mean?” He was like, “The thing is, people come in here all the time, and they’re like, ‘I want to own a coffee shop. I’ve always wanted to own a coffee shop.'” He was like, “It’s a lot like people who want to own a bar. They have all these romanticized notions.” He’s like, “The first question I ask is not so much, can you make a coffee drink?”
He’s like, “That could be learned. I didn’t know how to make coffee drinks before I got here.” He’s like, “My big question is, what’s your plan for January?” He goes, “Almost nobody who has expressed interest even understood why I would ask that question. I understood why January mattered. They’d say, ‘We’ll just like put our hot drinks on special.'” He’s like, “The thing is, January is a really hard month in our business because everybody has New Year’s resolutions. They want to quit coffee. They want to quit carbs. They’re in the gym. They’re redirecting their money.
Maybe they want to get debt-free. The first way they’re going to get debt-free is they’re going to eliminate the coffee budget.” He’s like, “There’s all these things that make January, February, and March really hard months for a coffee shop or a place like ours. If they do not know that when they’re coming in here, they’re not going to last.” I thought that was really interesting. Knowing what I know now, I would have asked him how long it took him to figure that out, whether that was when he was in business already, or if he knew that coming in.
You don't get an HR or finance department in independent retail. You're all the people, so you've got to know the numbers. Share on XNavigating the Hidden Seasons of Business Cash Flow
It was interesting, because of course, I am not a coffee drinker by nature. As soon as you asked the question, it was like, my first thought, because I’ve done a lot of this, was like, “I bet January is a hard month. Why would it be a hard month?” Before you even had said all the things that you said, it was like, “New Year’s resolutions. People are cutting coffee, they’re cutting sugar drinks.” I quickly got back there, because almost all independent retail has seasonality. It may not be obvious to an outside person. When you’re the consumer, and especially a consumer like you, you’re like, “Nothing happens in January. I still buy exactly the same amount of coffee I bought in January as I bought in November.” It’s not a consumer perspective. It is from the owner’s perspective.
I do not ever think of my favorite local coffee shops when I’m cutting back. It never occurs to me, like, “How is Acme Coffee Company going to stay in business if I do not go in every week?” I’m just making decisions based on what works for my household. It makes me think also, though, if you’re not prepared for those sorts of things, you end up reacting rather than making intentional, thoughtful, strategic decisions. What could you, or what should you, be asking yourself rather than being reactive? Is there a way to not be reactive?
The first thing is to watch and say, “What am I reacting to?” Look to see if the reaction is a pattern. First off, is it just reacting to a pattern? That’s one piece. The other is looking and saying, would have been a good question to ask him, “How long did it take you to realize what January meant to you and your business?” I now need to plan for a January problem. This is a first-quarter problem. I need to plan for the first quarter. The other thing it can be is, what are the things that I’m doing that are making this happen? If I’m a common denominator, is it something that I’m doing that’s making this thing happen?
As I said, one of the questions to ask is, where am I not looking that may be driving this thing to happen? If you like marketing and sales, and no one ever says they like marketing and sales, but for a lot of people, that still is their first go-to thing, marketing and sales. If it’s marketing, if I’m always going to marketing and sales, it’s like, what if it wasn’t marketing and sales? Where would it be? Look at the place that you’re not looking at. That gets you to start thinking about, “What really are our issues? What are we really trying to address here?” We can start working toward the root cause.
Some things that I’ve heard you say over the years is you can ask, “What is the system that created this?” Of course, oftentimes what I see is that when we ask that, the answer we get is that there is no system, because they’re so in the thick of it, they do not see anything. The big thing is the symptoms are visible. The root cause very rarely is. It’s like, “What decision created this?” I’ve heard you ask that, and very often the response is, “Nothing. I didn’t make any decisions,” because they consciously didn’t make any decisions and they do not realize that reacting to things is a decision.
No decision is a decision all by itself. The third thing that I’ve heard you say is, “What are the assumptions that created this?” They do not realize they made assumptions back to the last episode or the episode before when we were talking about the project table. You say, “What’s the assumption that makes you think the project table has to be here?” They do not have an assumption. They’re just like, “No, it’s just a fact. It’s a fact that every shop like mine has to have these things.”
You’re the person who has to come in and say, “You’re assuming all the shops that have this thing are profitable shops. I can tell you they are not because I see under the hood of their business. You do not and you never will because they’re not going to show it to you.” We can move past the discussion of why owners get pulled towards symptoms because we know that answer. It’s because the symptoms are what’s visible. I want you to tell me what the root cause is likely to be of some of these common symptoms that we see with businesses. One is inventory. That is something that you heard time and time again at h+h. People felt like they had an inventory problem. What do you think that actually is?
Fixing the Root Cause of Inventory Bloat
It’s because they’re buying like a consumer and not like an owner. They also have an assumption that more inventory creates more income, which is not actually true. There is a right level of inventory based on what the business will support. It’s not the other way around. Everyone thinks inventory drives income, but income actually drives what level of inventory you should have. It’s the other way. Back to no one talks about this because why would they? Not that no one, I talk about it.
Smart retail owners plan for seasonal dips months in advance instead of reacting when revenue slows down. Share on XWhen I bring it up in rooms, like I was at h+h and there was, I do not know, it was a pretty full room, 60, 70 people. When I brought that up, everyone’s eyes got really big. Like, “What do you mean that inventory doesn’t drive income?” It’s like, no, income should be driving inventory. It’s the other way around. Having $100,000 of inventory in your shop when you’re only selling $50,000 a year is not ever going to make it become $100,000 a year. It’s never.
That’s not the way it works because you’re probably in a little tiny town with a little tiny market with a little tiny. You may be able to raise it, but there’s a point that you’re not going to be able to get it to do anything beyond it. More inventory is not what the answer in that case. That’s one example that we think of. It’s also a cash flow issue. Inventory is also a cash flow issue.
Often people are not looking at the cash flow piece because, “I’ve got 30 days to pay it. I’ve got 60 days, I’ve got 90 days.” It’s like, that’s not exactly the answer that we’re looking at here. It’s understanding when it’s coming in versus when it’s going out, how quickly it’s turning, a whole bunch of things most people have never heard about unless they’ve been in a retail business at the inventory level. If you’ve been a sales associate, you have not been in the inventory.
What about payroll problems?
Aligning Staffing Needs With True Operational Value
Sometimes it really is a payroll problem. It’s truly overstaffing, thinking that you need to have more coverage than you have, which to some degree is in fact a payroll problem. Sometimes it’s about productivity and role understanding of what’s actually being done. Sometimes it’s about culture. You’ve got people that are not good fits. You are hired for a skill, but not for a behavior and an attitude and a culture fit. They may be very good at what they do, but there’s so much friction in the environment that you’re not getting 100% value out of what you’re investing in.
Back to assumptions, “No one should ever have to wait in line.” It depends on the business. If you’re at your grocery store, you really do not want to have to wait like 30 minutes in line. That’s because no one, I mean, sure there’s somebody, but no one really loves going grocery shopping. That’s their action problem, but having somebody have to wait ten minutes while you finish helping another customer with cutting fabric or picking out a color or trying on a different size or any of those things.
Most people, if they’re in your shop, they’re in it because they love the thing that you’re selling. Having them actually wait often increases the sale because they take time to look at someplace that they may not have looked before. If people are always waiting, maybe you need an additional staff person. To have coverage just in case, that’s not a good use of funds. Now we get into a cash flow issue and what does the business support?
What about customer service problems?
Setting Unshakeable Standards for Customer Service
Customer service problems usually are not having clearly defined rules for your staff to be able to know how to solve problems. “I do not know if I can give them a refund or not.” Have established on what things you can refund and what you cannot. Do you give credit? Do you go back to your credit card? In some cases, there are rules within your state that you also have to follow. For the most part, so long as you define it upfront, you’re going to be pretty well set. It’s when the customer does not know that there is a set of rules and that this is what we do and this is how we follow them.
That’s when you get to a customer service problem. It’s usually not your people. Sometimes it’s your people. If it is, then that can be a combination of a payroll problem and a customer service problem. You need to actually do the hard thing of releasing somebody. A lot of times customer service is about not having very clear expectations, both of your team and of the customer. What is acceptable for the customer to do. People hear the Nordstrom story about someone returning tires, and Nordstrom has never sold tires, and they still took it back. You are not fricking Nordstrom’s. You do not have their money.
That has to be an urban legend. I’m Snopes.com-ing that one.
I’ve heard it lots, and it could be an urban legend, but I also could see a company like Nordstrom’s that might be part of what they do, but you’re not Nordstrom’s. Right. You need to be really clear about what is within the scope of customer service and what is not within the scope of customer service. If anyone has a problem, so long as you can explain reasonably well why that’s true, most people will be okay with it. Also, not every customer is really your customer. The person who is like, “Meh, meh.” They might be having a bad day, but if you can tell it’s not that they’re having a bad day, they’re not your customer. They want unlimited things that you cannot provide.
Moving to the end here, what are the lessons that have to be learned? There is a set of lessons that you learn on your way to becoming a successful retailer running a sustainable business. One of them that you talked about early on is you’ve got to make that transition from customer to owner.
You have to realize that you are no longer a customer. I’m not a good shopper. I’m a really good retail owner because I’m not actually a good shopper. I do not like shopping.
You’re not going to spend two hours and five gallons of gas trying to compare across town.
No, and most of the time I’ll just decide not even to buy it. I am just not a shopper. I will think about it differently. That mindset, moving from consumer to owner, is a huge thing.
Consumer to owner. I think what you just talked about, right, is like superfan to operator.
The one that I harp on all the time, but it’s because I’ve seen it be the problem consistently again and again, is you have got to own, be responsible for, and understand your financial numbers. It doesn’t mean you have to do your financial numbers. You can hire a bookkeeper. I’m not saying you have to be the one to input everything. You do not have to be the one to run payroll. You need, however, to make sure you understand what’s happening with payroll from a financial perspective. You need to understand what’s happening with the business from a financial perspective.
Mastering Balance Sheets for Long-Term Business Health
Both the balance sheet and the income statement, not just the income statement or profit and loss. Folks do not look at the balance sheet. The balance sheet is where you’ve got how much you owe people, how much people owe you. Usually that’s not very much in a retail business. How much is in the bank, how much is sitting on the shelf as money that hasn’t become money. We call that inventory. You’ve got to understand those numbers, know what they are, and have key ones that you should be able to rattle off if I get on a call with you. It’s one of the first things that I will always ask.
I’ll find a reason so it doesn’t sound random, like I’m digging into your business, but I will say, “Can you tell me?” and I will usually ask three or four key numbers, and if they do not know, that is a giant flag for me. You should always have, not every little tiny detail, that is not what I’m looking at here, but some key numbers. Most people know how much they sold. They know their top-line income number.
Overstaffing just in case customers wait is a cash flow drain. Focus on productivity and clear role expectations. Share on XThat’s one. It is not the one I care about most. People say, “I’m not good at numbers. I’m not good at math. I’m not good at this.” That is critical for a business. As I said, every person that I have worked with has had some issue at some point around some piece of the numbers. Not always the same place, not always about the same thing, not always in the same way, but it was always about the numbers.
Just reinforcing what you said, like, without that information, you can never accurately answer the question of how does this decision affect our cash flow? How does this decision affect our profit? How does this decision affect our labor allocations? If you cannot answer those questions, then you cannot answer the question of whether that decision is sustainable.
Sustainability is 90% about finance.
If somebody comes to me, which has been happening more this year than it has ever happened before, where I have a business owner who comes to me to ask whether they should either start running paid social ads or if they should stop running their ads. If they’re a product-based business, the first question I ask is, “What’s your cost of goods sold?” I need to know the cost of goods sold on whatever they’re promoting in their ads in order to tell them how successful those ads are or in order to tell them how much they could truly afford to be spending on ads and how to promote that.
Often they do not have an answer to that question. They do not know. They cannot tell me what their most profitable product is. I cannot even suggest what to promote via ads. There is so much that comes from understanding just that one piece. What is the cost of goods sold? What is the average that you are spending on the items that you are bringing into the store?
That was something we had with one of our clients a while back. She’s like, “My ads person says we’re doing really well. We’re making 3X on what we’re investing.” I was like, “You are not making 3X on what you’re investing. You may invest $100 and sell $300, but that’s not making 3X because your product costs you over $150. On $100, you’re making $125 or $140. I’m not sure investing $100 to get $40 additional dollars is a good return on investment for an ad.”
That was like math that never had occurred to her. Obviously, I brought you in on the conversation, which I know made you way more aware of this because service-based businesses technically do not have a cost of goods in the same way. When someone says, “You sold $300 of courses.” It’s like, That probably was a good return on $100 for ads, not the same for a physical product.
It’s just not. Inventory is not the problem. Payroll is not the problem. Customer service is not the problem. What you have pretty much spent the last 25-ish minutes telling us is that the actual problem is knowing how to make decisions as a business owner.
I say this often to my clients. It’s like, if it was easy, everyone would do it. The reason not everyone is a business owner is that it’s actually hard. There are some complications to it, some difficulty from that standpoint, but it also means that we have to make hard decisions, which means someone we really like, we need to let go because they’re not performing at the level that they need to perform, or that they’re causing friction, or the person who actually got us to this place is no longer a fit. That’s a hard decision. Sometimes it’s like, “I really love this product, but I also know my customers are not really going to buy it.” I have to choose not to invest in that product.
If it was easy, everyone would do it. If it was easy, everyone would do it. If it was just about the money, I think that is really a bow around this entire series. Independent retailers are not in it just for the money, because if you were in the business just for the money, you would realize very quickly there are so many easier ways to make this amount of money. You’re in it because you have a passion, but your passion doesn’t override the necessity to understand these fundamental business principles.
If you’ve been tuning in to this series and you found yourself thinking, “I do not want to,” then maybe what you need to do is just talk to Gwen because she will gently and patiently hold space for your tantrum. Trust me, I throw tantrums with her all the time, and she puts up with me. The thing is, you are working hard enough. That’s why we throw tantrums, because we’re like, “I’m already working as hard as I possibly can.” Working harder is not the solution.
It’s figuring out how to work smarter, and working smarter oftentimes comes with understanding what the right questions to be asking yourself are that will move you out of reaction mode into a much more proactive strategic mode. It all begins by correctly identifying the problem that you need to be solving that is leading you to want to tear out your hair and stomp your feet. In order to do that best, get some outside perspective and talk to Gwen. You can schedule a clarity call at www.tonyakubo.com/Clarity and get on Gwen’s calendar. Take about 20 or 30 minutes, and she’ll help you out.
Mentioned in This Episode
About Your Hosts
Gwen Bortner has spent four decades advising executives and entrepreneurs in 45+ industries. She helps women succeed in business without sacrificing happiness by identifying their true desires and aligning their business functions. She spots overlooked bottlenecks and crafts efficient plans toward sustainable success that center your values and priorities. Known for her unique approach to problem-solving and accountability through the G.E.A.R.S. framework, Gwen empowers clients to achieve their definition of success without sacrificing what matters most.
Tonya Kubo is a marketing strategist and community builder who helps entrepreneurs build thriving online communities. As co-host of The Business You Really Want and Chief Marketing and Operations Officer (CMOO) at Everyday Effectiveness, she keeps conversations on track and ensures complex business concepts are accessible to everyone. A master facilitator with 18+ years of experience in online community building, Tonya takes a people-first approach to marketing and centers the human experience in all she does.
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