Can your business afford Black Friday & Cyber Monday sales?

Can your business afford Black Friday & Cyber Monday sales?

Black Friday and Cyber Monday (BFCM) are two days that hold significance to anyone in the retail industry. However, the BFCM time period looks very different for not only the eCommerce industry as a whole, but especially for small businesses. 

Small businesses have often tried and failed when it comes to BFCM. They simply do not have the right strategy in place, so it oftens becomes more work than it’s worth. Small businesses try to compete with the big guns, offering huge discounts that they cannot afford. But BFCM has major benefits for the small business:

  • It is a great opportunity to get rid of your old stock.
  • It is a chance to reward your loyal customers.
  • You can gain new customers!
Photo by Brooke Cagle on Unsplash

Done right, the value of brand awareness and new customers can easily overtake the low margins you may face.

But who wants to earn less if you don’t have to?

You need to look at your business, do some calculations and see if your business can even afford a BFCM sale. To do this, you need to calculate your gross profit, your net profit, markup and breakeven point. If you do not know how to do this, please refer to this article for a step-by-step breakdown.
From there, you will need to have a look at how much your discount will affect your profit.

Are you covering your own costs?
How much more will you need to sell in order to break even?

Photo by Brooke Cagle on Unsplash

Below is a table that shows how much you need to increase your sales volume in order to make a profit, by using only your gross margin and the discount you would like to apply.

To calculate, use the following equation:

(GROSS MARGIN / (GROSS MARGIN – DISCOUNT) – 1) x 100 = __% increase required. 

Therefore, if my gross margin is 40% and I would like to apply a 5% discount, I will need to increase my sales volume by 14.3%.

(40 / (40 – 5) -1) * 100 = 14.3%

*Note: be sure to use the brackets correctly. 

Once you have found a percentage that you are happy with and think you can achieve, you need to relook at your marketing strategy to see how you can increase traffic to your site and how you can increase sales volume.

Good luck!