What Is the Retail Inventory Method? Definition, Formula & Calculator

Retail inventory manager looking at an inventory illustration on a PC

The retail inventory method is an accounting procedure that estimates the value of a retail store’s merchandise. This method produces the ending inventory balance for a store by calculating the cost of inventory relative to the price of the goods. In short, it’s one of the most common ways to calculate the value of your stock.

What Is the Retail Inventory Method?

You can use the retail inventory method to quickly estimate the value of your ending inventory over a given time period. 

Since inventory is the bread and butter of your retail store, you likely have a lot of capital tied to your stock. Therefore, it makes sense to keep track of your inventory so you can make effective decisions when it comes to what to order, what to invest in, and when to carry more products.

Although there are many ways to estimate the value of your stock, the retail inventory method is one of the most common and efficient techniques. This method works by taking the total retail value of all the products in your inventory, subtracting the total amount of sales, and then multiplying that amount by the cost-to-retail ratio. 

We understand how challenging it is to run a retail store. You have to manage employees, build staff schedules, implement marketing strategies, and keep an accurate count of your store’s inventory to ensure you don’t run out of any products. Furthermore, you must ensure you aren’t losing money on sales by correctly calculating your cost-to-retail ratio.

The best way to guarantee you don’t run out of inventory or lose any money is by mastering the retail inventory method.

Retail Inventory Method Advantages

The main advantage of the retail inventory method is that it saves retailers the time and expense of shutting down temporarily to conduct a physical inventory. Physical inventories are time-consuming and can impact your business’s bottom line.

During physical inventories, you must pay your staff to help while also shutting down your business from outside customers. Although some retailers perform physical inventories at night time, your staff are prone to errors during a spontaneous graveyard shift.

Furthermore, the retail inventory method is part of the Generally Accepted Accounting Principles (GAAP) provided by the American Institute of CPAs. It’s also useful for determining the value of your retail business since this method creates a report on the value of the inventory on hand.

Retail Inventory Method Disadvantages

Although the retail inventory method has a lot of benefits, there are some drawbacks to be aware of. First of all, it’s important to understand that it’s just an estimate and doesn’t account for items that are stolen, broken, or otherwise taken out of inventory for reasons other than a sale.

Furthermore, the retail inventory method works best when the markup is consistent across all your products. If different products carry different markups, the end result won’t be completely accurate.

For example, if your retail clothing shop marks up every item it sells by 70% of the price you get from wholesale distributors, you can accurately use the retail inventory method. However, if you mark up some items by 15%, some by 30%, and some by 60%, it is difficult to apply this accounting method accurately.

Another disadvantage is that large additions of inventory would throw off calculations. For example, this can occur in the event of acquiring another company. 

Who Should Use the Retail Inventory Method

The retail inventory method isn’t suitable for everyone. All retailers are different, and the retail inventory method is an optimal accounting strategy for specific types of retailers.

Those who will find the most value in the retail inventory method tend to be:

  • Retailers with multiple locations since physical inventories are difficult to coordinate for the same time in different locations
  • Retailers who don’t usually have large amounts of inventory in transit since it doesn’t account for those
  • Retailers who are comfortable with estimates that are regularly available on an on-demand basis
  • Retailers who have consistent markups across all their products

How to Calculate the Retail Inventory Method

To calculate your ending inventory value with the retail inventory method, use the following steps:

Step 1: Calculate the Cost-to-Retail Ratio

The first step is determining the cost-to-retail percentage of your retail inventory. The cost-to-retail ratio determines how much your inventory costs in relation to the retail price.

For example, if a sweatshirt costs $15 to manufacture and you sell it for $100, the cost-to-retail ratio is 15%.

Therefore, you can calculate your cost-to-retail ratio with this formula:

  • cost-to-retail ratio = (cost of merchandise / retail price of the merchandise) x 100

Step 2: Calculate the Cost of Merchandise Available for Sale

The next step is to determine the exact time period you will be reporting. Then, you must identify the cost of inventory at the beginning of the time period and the cost of any additional inventory purchases made during the course of that time period.

For example, if your shop had a beginning inventory of $30,000 and then you purchased $10,000 of new inventory during that period, your cost of merchandise available for sale is $40,000.

The formula for this calculation is

  • Cost of merchandise available for sale = cost of beginning inventory + cost of additional inventory

Step 3: Calculate the Cost of Sales During the Time Period

Next, you need the total merchandise sales and cost-to-retail percentage for your chosen time period. You will use these numbers to calculate the cost of sales, which represents the total cost of goods for all the merchandise you sold during the reporting period.

For example, let’s say your cost-to-retail ratio is 15%, and you had sales of $50,000 over your chosen time period. You can multiply your cost-to-retail ratio by your total sales to find your cost of sales was $7,500.

  • Cost of sales = sales during the chosen time period x cost-to-retail percentage

Step 4: Calculate Ending Inventory

Now, you can use the cost of merchandise available for sale and the cost of sales during that period to determine your ending inventory.

Your ending inventory represents the value of merchandise you have available at the end of your reporting period. Once you calculate your ending inventory, you can use it on future balance sheets. However, you must ensure its accuracy if you report your store’s financial information when seeking financing.

  • Ending inventory = cost of merchandise available for sale – cost of sales during the chosen time period

Example of the Retail Inventory Method

Let’s pretend your retail business sells home coffee roasters for an average price of $300 and a cost of goods of $150. As such, your cost-to-retail ratio is 50%. 

In this example, let’s also say your beginning inventory costs $500,000, and you paid $200,000 for purchases during the month. During the same time period, you had sales of $1,000,000.

To calculate your ending inventory value:

How to calculate your ending inventory value:

Beginning inventory

+ $500,000

Purchases

+ $200,000

Goods available for sale

= $700,000

Sales

– $500,000 (Sales of $1,000,000 x 50%)

Ending Inventory

= $200,000

Additional Retail Inventory Method Tips

If you plan to use the retail inventory method for your business, keep the following tips in mind.

1. Always Have Accurate Data Available

The retail inventory method requires you to use certain numbers, including your cost-to-retail ratio, beginning inventory, and sales. To ensure the calculation is efficient and effective, you need to keep accurate numbers available.

Therefore, you should equip your business with a POS (point of sale) and retail management system with strong reporting and analytics capabilities. 

2. Don’t Ditch Physical Inventory Counts

Since the retail inventory method only gives an estimate of your ending inventory value, it’s not the perfect substitute for physically counting and reconciling inventory.

For this reason, we still recommend scheduling physical inventory counts. However, it doesn’t need to be as frequent after integrating the retail inventory method.

Frequently Asked Questions (FAQs) for Retail Inventory Method

Here are a few common questions retailers have about the retail inventory method.

Bottom Line on Retail Inventory Method

Keep in mind that the retail inventory method is more of an educated guess than a concrete calculation of how much value your ending inventory holds. This method provides directionally accurate answers to give you quick snapshots at any given time. It’s cost-effective, quick, and works best when it’s part of your overall inventory management strategy.

All About Sales

Sale spelt out with 3D letters

All About Sales

Sections in This Topic Include


Foundations for Successful Sales

Sales Process and Sales Pipeline

Planning Your Sales Strategy

1. Generating Leads – Using Sales Channels

2. Qualifying the Client — Is Client a Prospect?

3. Sales Interviews and Presentations With Prospects

4. Sales Proposals and Negotiations

5. Closing the Sale

6. Account Maintenance and Management

Miscellaneous Perspectives — and Challenges and Pitfalls

Managing Yourself for Successful Sales

Managing Sales Activities and Sales Force

General Resources

Also consider
Related Library Topics

Learn More in the Library’s Blogs Related to Sales

In addition to the articles on this current page, also see the following blogs that have posts related to Sales. Scan down the blog’s page to see various posts. Also see the section “Recent Blog Posts” in the sidebar of the blog or click on “next” near the bottom of a post in the blog. The blog also links to numerous free related resources.


Foundations for Successful Sales

What is Sales?

Before learning more about how to do successful sales and selling, it’s important first to get a sense of what sales is, so you can more accurately understand the guidelines, tips and tools provided throughout this topic. Also, it’s useful to understand different viewpoints about sales, especially so you can more accurately understand how your clients talk about sales.

Also consider
Marketing (scan the subtopics to understand Marketing)

Understanding the Sales Process (Sales Pipeline)

There is a general, overall process that successful sales people follow, although there are different perspectives on that process, including names for the various steps along the way. The next major section in this topic includes more detailed guidelines, tips and tools for each stage of one perspective on the sales process, or sales pipeline as some people refer to it.

Understanding the Sales Cycle

The sales cycle is often referred to as the time it takes to do the sales process mentioned above. Timing is critical because the faster and shorter the sales cycle, the faster that more revenue is generated, customers are satisfied and more customers can be gotten by the organization.

Value of Product Knowledge

There’s an old saying that a “good salesman can sell anything.” That’s not so true today when the nature of products and services can be highly complex and the nature of customers and clients can be highly demanding. Yet there’s an ongoing argument about which is best — product knowledge or sales skills.

Also consider
Product Development

Useful Knowledge and Skills to Have in Sales

You don’t have to read all of the resources referenced from the following links. Rather, a quick scan will give you an impression of the different types of knowledge and skills to start learning over time. Perhaps for now, realize that there’s more to being a good salesperson than learning the sales process and sales cycle. Many of the following are also more directly associated with other subtopics in this overall topic of Sales.

Useful Business Skills for Salespeople

Useful People Skills for Salespeople

Understanding Types of Clients and How to Engage Them

Also consider

Types of Clients

Multi-cultural Customers and Sales

Also consider
Diversity and Inclusion




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Planning Your Sales Strategy

Your sales strategy is the approach you have designed to powerfully describe your products and services to your current and potential customers, so that they appreciate their benefits to them and thus, are more inclined to purchase them from you.

Your sales strategy should be associated with a variety of methods to guide current and potential customers through the typical sales pipeline (described below). Methods might include, for example:

  1. Qualifying prospects, that is, deciding which prospects are most likely to become customers
  2. Contacting them via communication channels that are most suitable to them
  3. Effectively describing, or pitching, the product or service to them
  4. Closing the sale, that is, getting formal agreement from each customer to buy the product or service
  5. Ensuring follow-up activities, for example, strong customer service to ensure strong customer satisfaction

Sales Process and Sales Pipeline

1. Generating Leads — Using Sales Channels

A lead is a potential customer. (Later, in the sales process, you will qualify the lead to determine if he/she is a prospect, that is, is someone who is very likely to buy from you.) Sales channels are the methods by which salespeople and customers communicate with each other. The resources that are referenced in this subtopic usually give advice about how best to use a particular channel in sales, but don’t go primarily with that advice — also follow the guidelines in each phase of a sales process, so that you’re following guidelines in a systematic manner.

Direct Postal Mail (Sales Letters)

Also consider

Email

Also consider

Face-to-face

Also consider

Internet and Web

Also consider

Social Networking

Also consider

Telemarketing (Phone)

Also consider

Trade Shows

2. Qualifying the Client — Is Client a Prospect?

Once you have a list of leads, you need to qualify them, that is, you need to assess whether they are likely to buy your product or service based on, for example, their needs and wants, match between their needs and wants and the nature of your products and services, key decisions by the decision makers, ability to pay and preferences for the timing to buy. A qualified lead is a prospect. (Depending on the nature of your product or service, you might be asked to provide a proposal, even without having an opportunity to more carefully qualify the lead. In that situation, you can skip to the section Proposals.)

First Impressions and Establishing Rapport With Leads

Also consider

Understand the Needs and Wants of Each Lead — Ask the Right Questions

One of the worst approaches now is to start “pitching” or pushing your product or service. Instead, learn more about the lead, especially by asking useful questions. Here’s where the guidelines in the previous topic Understanding Types of Clients and How to Engage Them are especially useful because you’ll need to really understand more about the lead in order to discern if they are a prospect, if they are likely to buy from you.

Also consider
Skills in Questioning

Getting to Decision-Makers

Often, the person you first contact is not the person who ultimately will decide whether to buy from you. So even if the first person really likes your product or service, it’s as important that you influence the real decision maker. Many times, that person is a very busy upper manager who does not want to be bothered by someone trying to sell something to him or her.

Following-Up With Potential Prospects

Effective follow-up shows you are thorough in your work and are sincerely committed to working with the prospect. Also, your follow-up often reminds the prospect of your initial contact– a contact that they might have forgotten in their busy work lives.

3. Sales Interviews and Presentations With Prospects

Effective Sales Presentations

Also consider
Presenting

Convincing the Customer and Dealing With Objections

Also consider
Power and Influence

4. Sales Proposals and Negotiations

Proposals and Sales Letters

If you have been successful in prospecting the lead and the prospect indeed is interested in your product or service, then you might be asked to provide a proposal that provides more information about your organization, its products and services, and how you would work with the potential client. The client also might be asking several vendors to provide proposals, so that the client can have more choices from which to choose.

Negotiations

Often, your proposal or sales letter is the first time that the client really absorbs the details of the opportunity that you’re bring to him or her. It’s not uncommon that the client wants to modify certain terms or pricing. Thus, it’s useful for you to have at least some basic skills in negotiating.

Also consider

5. Closing the Sale

The closing process is getting the commitment of the prospect to buy your product or service. The close is when the client has committed. It represents the close, or ending, of the sale process. However, many would assert that the sales process really doesn’t end there, rather the sales process continues to ensure a strong, successful relationship with the client even after a contrast has been signed.

Techniques for Closing

Sales Contracts

Also consider
Business Contracts

6. Account Maintenance and Management

What’s Account Maintenance and Management?

Also consider
Management

Customer Service

One of the main responsibilities in this phase of the sales process is responding to the needs and questions from customers. This phase also is where you can learn a lot about how well your product or service is meeting the needs of customers, and about any changes that you might want to make to those products and services. The following link is to many other links about customer service.
Customer Service

Customer Satisfaction

The ultimate goals of a sales process should be customer satisfaction. Without that, the revenue won’t follow. The necessary learning won’t follow about how to continue to improve products and services,
about how to innovate to produce new products and services. The following link is to many other links about customer satisfaction.

Also consider
Customer Satisfaction




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Miscellaneous Perspectives — Challenges and Pitfalls

Various Philosophies of Marketing and Sales

Before reading the following links, the reader is encouraged (if he or she has not yet) to scan the subtopics in this overall topic to get a sense of the activities required in sales and the order of those activities. This is in lieu of trying to learn about sales primarily be reading numerous different perspectives
and opinions. Do come back to read some of the following after getting an overall impression of sales.

Challenges and Pitfalls


Managing Yourself for Successful Sales

Staying Motivated

Also consider
Motivation

Keeping Positive Attitude

Also consider
Attitude

Organizing Yourself

Also consider
Organizing Yourself

Managing Your Time and Stress

Also consider


Managing Sales Activities and Sales Forces

Sales Staffing and Training

Also consider

Sales Forecasting and Goals

Also consider

Motivating Sales Force

Also consider

Measuring and Evaluating Sales Effectiveness

Also consider

Compensating Sales Force

Also consider
Benefits and Compensation


General Resources

Resources Providing Many Resources

Glossary and Dictionaries About Sales

Free Tools and Templates


For the Category of Sales:

To round out your knowledge of this Library topic, you may want to review some related topics, available from the link below. Each of the related topics includes free, online resources.

Also, scan the Recommended Books listed below. They have been selected for their relevance and highly practical nature.


Telemarketing

A smiling customer service worker on a call

Telemarketing

Sections of This Topic Include

Various Perspectives on Telemarketing
Telemarketing Problems

Also consider
Related Library Topics

Learn More in the Library’s Blogs Related to Telemarketing

In addition to the articles on this current page, see the following blogs which
have posts related to Telemarketing. Scan down the blog’s page to see various
posts. Also see the section “Recent Blog Posts” in the sidebar of the blog or
click on “next” near the bottom of a post in the blog.

Library’s Marketing Blog
Library’s Public and Media Relations Blog


Various Perspectives on Telemarketing

Basics and Future

Telemarketing Etiquette
also see “Selling Over
the Telephone”

Dialing for Dollars: Telephone Skills that Matter

Also consider
Advertising
and Marketing laws

Appreciative
Inquiry

Customer
Satisfaction

Customer
Service

Feedback
Interviews
(exit interviews, by media, for a job, selecting job candidate
and research method)

Listening
Presenting
Non-Verbal Communications
Questioning
Sales

Telemarketing Problems to Avoid

Telemarketing Fraud
(Wikipedia)

Do Not Call Registry
Telemarketing
(advice from the FBI)

General Resources

Standards
for the Teleservices Industry: The Time is NOW

American Teleservices Association,
with another extensive list of information

Continue to Learn in the Library’s Marketing Blog

The Marketing blog is hosted by an expert in marketing who writes two posts
per week, including from guest writers. Learn from those posts — even consider
writing an article yourself!

Free Management Library’s
Marketing Blog


For the Category of Marketing:

To round out your knowledge of this Library topic, you may want to review some related topics, available from the link below. Each of the related topics includes free, online resources.

Also, scan the Recommended Books listed below. They have been selected for their relevance and highly practical nature.

Related Library Topics

Recommended Books


The 7 Best Ecommerce Platforms for Small Business

person making an online purchase on an ecommerce platform

It’s a great time for small businesses to expand into online selling, as there’s an expansive range of excellent the best ecommerce platforms software available. But there are so many features and pricing options, it can be difficult to choose one. Use this guide to find the best ecommerce platform so you can jumpstart your online sales.

Best Ecommerce Platform for Small Business

  1. Shopify – Best Overall
  2. Wix – Best for Multiple Sales Channels
  3. BigCommerce – Best for Growing Businesses with High Sales Volume
  4. Square Online – Best for Affordability
  5. Shift4Shop – Best for Businesses Wanting a Free Plan
  6. Squarespace – Best for Website Design
  7. Ecwid – Best for Businesses Wanting to Keep Their Website

Product

Price

Payment Processing Options

Website Hosting Platform

Omnichannel Capability

Shipping

Third-Party Integrations

$9 to $2,000+ per month

Shopify Payments or Third-Party Providers with additional fees

Included

Facebook and Instagram; additional charges for other marketplace integrations, Shopify Point-of-Sale (POS)

All plans offer Shopify Shipping with discounts for DHL Express, UPS, or USPS

Shopify App Store available

Wix logo

Wix

$23 to $49 per month

Wix Payments or Third-Party Providers with no additional fees

Included

Facebook, Instagram, Amazon, eBay, event tickets, hotel bookings, restaurant orders, Wix POS

Dropshipping by Modalyst on some

Wix AppMarket available

$29.95 to $299.95

More than 55 third-party providers available with no additional fees

Included

Amazon, eBay, Walmart, Facebook, Instagram, Google Shopping, Integrates with compatible POS systems

Real-time shipping quotes from UPS, USPS, FedEx, and more

Ecommerce Apps Marketplace available

Free to $72 per month

Square Pay, Apple Pay, Google Pay, Afterpay, Cash App Pay, PayPal

Included

Instagram, Facebook Ads, Google Ads, Square POS system

Delivery through third-party courier. Premium plan has real-time shipping rates

Connections can be made with Square API

Free to $229 per month

Shift4 system and access to 100+ other providers

Included

Facebook Shop, Facebook Ads, Google Shopping Feed, eBay, Houzz, Shift4 POS system

All plans provide real-time in-cart shipping information from UPS, USPS, and FedEx

Shift4Shop App Store Online

$23 to $49 per month

Stripe, PayPal, Apple Pay and Afterpay

Included

Facebook’s Product Catalogue and Instagram, Higher-tiered plans integrate with Square POS hardware

Advanced Commerce plan calculates real-time rates for UPS, USPS, and FedEx

Supports a variety of third-party integrations

Free to $99 per month

Over 70 payment providers available

Included; also integrates with other website hosting services

Facebook, Instagram, Amazon, eBay, Ecwid POS

Business and Unlimited plans have dimensional shipping rates

Ecwid App Market

Best 7 Ecommerce Platforms for Small Business

Shopify logo

Shopify

$9 to $2,000+

4.5

With comprehensive features, flexible pricing, and a variety of plans, Shopify lives up to its reputation as one of the best products in the ecommerce space for small businesses. Shopify gives you five tiers to choose from, ranging from the basic payment functionality of the Lite plan all the way to the Enterprise-level Plus offering. 

In the mid-range plans, you’ll have access to a full-featured website builder with unlimited storage and bandwidth and Shopify’s in-house payment service, Shopify Payments. Beyond that, there’s advanced inventory management, point-of-sale (POS) integration, wholesale capabilities, and the ability to sell directly on Facebook and Instagram.

Shopify gets our Best Overall rating thanks to its comprehensive feature set, expansive sales channel support, and shipping discounts up to 77% on all plans (and more at higher tiers). One notable caveat, however, is if you’re dedicated to using a payment system that isn’t Shopify’s; without using their in-house payment service, you’ll pay additional transaction fees.

Pricing

Monthly plans:

Shopify Lite: $9 / Basic: $29 per month / Shopify: $79 per month / Advanced: $299 per month / Shopify Plus: $2000+ per month

(Annual discounts available)

Shopify Payments Fees:

Basic: 2.9% + 30¢ USD per transaction / Shopify 2.6% + 30¢ USD per transaction / Advanced 2.4% + 30¢ USD per transaction. If not using Shopify Payments, then there are additional transaction fees Basic: 2% / Shopify: 1% / Advanced: 0.5% plus whatever fees your party payment processor charges

  • Robust app store provides extensive outside integrations
  • Strong inventory management and shipping features
  • Reduced payment processing fees at higher tiers
  • There are additional transaction fees if you don’t use Shopify as your payment provider
  • Integration with Amazon and eBay requires paying for third-party apps
  • Monthly plan rates are higher than competitors
Wix logo

Wix

$23 to $500

4.3

Wix’s ecommerce platform is one of the best if you want to get your products and services in front of customers in as many ways as possible. It has a market-leading website builder that includes seamless integrations with third-party marketplaces like Amazon, eBay, Facebook and Instagram. Further, Wix allows you to sell event tickets, service bookings, hotel reservations, and food orders, so you can reach your customers in a wide variety of channels and selling formats.

Wix has its own in-house payment service as well as the ability to use another payment provider with no additional fees. There’s also integrated dropshipping services by Modalyst for physical items, a built-in CRM, and moderate pricing that matches or exceeds other products on the market.

If you’re a small business who has service offerings that don’t fit into the traditional ecommerce box or you want to sell products on third-party channels, then Wix is a very strong option.

Pricing

Business Basic: $23 per month / Business Unlimited: $27 per month / Business VIP: $49 per month / Enterprise plans starting at $500 per month

Wix Payments: US: 2.9% of the transaction amount + 0.30 USD per transaction

  • Website builder is one of the best on the market
  • Strong third-party integrations
  • Excellent shipping features
  • Reports are only available on the highest tier plan
  • There are limits to storage space and video bandwidth
  • Transaction fees on Wix Payments are flat regardless of tier
BigCommerce logo

BigCommerce

$29.95 to $299.95

4.1

BigCommerce is a robust ecommerce product that gives small businesses advanced features and tiered plans that allow room to grow. It presents a full-featured website builder with a blog, unlimited storage, unlimited bandwidth, and product listings, compatibility with more than 65 different payment vendors, and point of sale integrations such as Square, Vend, and Clover.. 

In addition, you’ll be able to integrate directly with sales channels like Amazon, eBay, Walmart, Facebook/Instagram, and Google Shopping. There’s also excellent integration with a variety of third-party apps and tools that can help you run your business more efficiently and effectively.

If your business has high sales volume or is growing rapidly, then you’ll want to take BigCommerce into consideration. The wide breadth of features and flexibility in payment processing and shipping options makes BigCommerce a competitive product.

Pricing

Standard: $29.95 per month / Plus: $79.95 per month / Pro $299.95 per month / Enterprise plan with custom pricing. Discounts for annual payment available.

  • Excellent variety of features designed to help boost your sales
  • No additional transaction fees on payment processing
  • Priority customer support at Pro level
  • Higher tier plans are more significantly more expensive than competitors
  • Some features–customer reviews, cart tools– are only available at higher tier plans
  • BigCommerce may be overkill for small businesses
Square payroll logo

Square Online

Free to $72

4.0

Square is well-known for their POS systems that allow small businesses to take credit and debit card payments on mobile devices. The company also offers an ecommerce solution called Square Online that gives companies the ability to create online shops with strong feature sets and affordable prices.

Square Online offers four plans that are priced competitively, including a free tier. All plans integrate seamlessly with Square’s POS solutions and have a website builder that can be customized at higher tiers. Marketing functionality is built in with Square Online, giving you access to SEO tools, a blog platform, and the ability to sync up with external ad networks like Facebook Ads and Google Ads. While payment processing fees equivalent to their competitors for most plans, you’ll get a better rate at the premium tier.

We recommend Square Online because it offers a comprehensive solution that has a competitive set of features that provide good money for the cost. An additional benefit is that if you already use Square for your in-person sales, then you’ll be able to keep all of your inventory synchronized with Square Online.

Pricing

Monthly plan:

Free / Professional: $12 per month / Performance: $26 per month / Premium: $72 per month (All rates billed annually)

Square Pay Processing fees: Professional and Performance: 2.9% + 30¢ per transaction / Premium: 2.6% + 30¢ per transaction

  • Attractive pricing that includes a free plan
  • Excellent website building options, including SEO tools and a blog platform
  • Free online ordering service for restaurants
  • Free plan has limited website functionality and features
  • Payments are limited to Square Pay, Apple Pay, Google Pay, Cash App, Afterpay (PayPal on high-tier plan)
  • Website builder is only customizable on higher-priced plans
shift4shop logo

Shift4Shop

Free to $229

4.0

Shift4Shop offers something unique in the ecommerce space: a free plan with advanced features that other companies make you pay for. As long as you’re willing to use Shift4’s payment service–which has industry standard pricing of 2.9% plus 30 cents per transaction –you’ll get a premium ecommerce solution with features like website hosting with unlimited bandwidth and storage, excellent marketing tools, and a wide variety of external integrations completely for free.

In addition to its free plan, there are a number of paid tiers that allow you to choose from over a hundred payment providers with no additional transaction fees. All of Shift4Shop’s plans have access to a suite of marketing features, such as built-in SEO tools, email newsletters, and a blog.

There’s also real-time shipping rates from major carriers, inventory control, and a number of sophisticated product listing features standard. Every plan also integrates with Facebook Shop, Google Shopping Feed, and eBay, so you’ll have plenty of options when it comes to selling on third-party channels.

While each one of Shift4Shop’s ecommerce software plans have extensive features and are worth taking a look at, we’d recommend the service especially to small businesses who want a robust ecommerce solution without having to pay monthly service fees.

Pricing

Basic: $29 per month / Plus: $79 per month / Pro: $229 per month / End-to-End Ecommerce: free. No additional transaction fees charged beyond payment processing.

  • Free plan offers premium features without monthly fees
  • Strong marketing and multi-channel tools
  • Wide variety of payment vendors available outside of Shift4’s in-house service
  • Payment fees are on the free plan are higher than competitor offerings
  • Website builder could be more user friendly
  • Lower-level plans lack some features that some competitors provide
Squarespace logo

Squarespace

$23 to $49

3.9

If you’re looking to build an online store that offers excellent website design options and usability while also providing solid ecommerce features, then Squarespace should be at or near the top of your list. Squarespace’s website building and hosting services are well regarded for good reason, and their ecommerce functionality provides everything most small businesses will need to get up and running. 

You can choose from three plans that offer reasonable pricing and solid, if not overwhelming, payment processing choices, with Stripe, PayPal, Apple Pay, and Afterpay all available. Facebook and Instagram store integration are also possible.

On the higher tier plans, there’s support for Square’s POS hardware and real-time shipping information. You can also integrate third-party apps such as CRM or email marketing software, but you’ll have to use external services like Zapier or Automate.io to do so.

With Squarespace, you’ll get a beautiful website that supports the ecommerce needs of most small businesses at a reasonable price.

Pricing

Business: $23 per month / Basic Commerce: $27 per month / Advanced Commerce: $49 per month.

The Business plan has a 3% transaction fee in addition to payment processing fees, the other two plans have no transaction fees.

  • Top of class website design features
  • Reasonable Pricing
  • Shipping and POS support at higher tiers
  • Relatively limited choices in payment processing
  • Additional transaction fees at lower tier
  • Fewer possibilities for omnichannel selling than competitors
Ecwid logo

Ecwid

Free to $99

3.8

Ecwid, part of Canadian company Lightspeed, is an ecommerce product that allows you to sell your products or services in a variety of sales channels including your own website, third-party marketplaces like Amazon or eBay, and social media stores such as Facebook.

The service can be a plug-in that you add to your existing website or integrated as part of a stand-alone storefront called Instant Site. Ecwid is competitively priced for small businesses and offers a free tier.

Ecwid can integrate into a variety of web hosting platforms such as WordPress, Weebly, and Squarespace, giving you control over how your store is presented and ensuring a smooth customer experience. You’ll be able to choose from over 70 credit card payment providers and there’s no additional transaction fees beyond payment processing fees.

The highest level Unlimited Plan also integrates with Ecwid’s POS system that is compatible with Square, Clover, and Alice, giving you the capability to sell both online and in-person using the same payment system.

If you’re a business who wants their online shop to be fully integrated into their website while also keeping a great deal of flexibility in terms of payment vendors and POS services, then Ecwid is worth taking a serious look at.

Pricing

Free / Venture: $15 per month / Business: $35 per month / Unlimited: $99 per month (with annual discounts)

  • A top choice if you have an existing website that you want to augment with an online store
  • Excellent integration with a variety of POS systems
  • App market that provides extensive third-party integrations
  • The lower tier plans have limits on product listings
  • Lower tiers don’t allow listing on Amazon or eBay
  • Competitors have more robust website builder tools

Methodology for the Best Ecommerce Platform for Small Business

This ecommerce software comparison guide is designed to help you uncover the ideal platform for your small business. We evaluated the candidates using the following criteria:

Pricing: We looked at monthly fees and transaction fees, with a focus value for money for paid plans and feature set and transactions fees for free plans

Payment processing options: We considered the fee structure, which is typically a percentage of the transaction amount and a small flat fee. Weight was also given to products that allow you to choose your payment provider without additional fees.

Website hosting platform: We looked at the quality of the website builder, including the availability of templates, customizability, ease of use, and mobile compatibility.

Sales channels capability: We evaluated the ability of an ecommerce platform to integrate their stores into POS systems, marketplaces like eBay, Etsy, or Amazon, or social media sales channels like Facebook and Instagram.

Shipping: We considered availability of shipping options, including real-time rate calculation, discounts, and the availability of dropshipping services.

External integrations: The ability of an online store to be connected to third-party apps like customer relationship management (CRM) software, online marketing tools such as email newsletters, or other platforms.

Our rating took into account these criteria when arriving at a final score on a scale of zero to five for each category.

Frequently Asked Questions (FAQs) for Best Ecommerce Platforms for Small Business

Bottom Line: Best Ecommerce Platforms for Small Business

With a wealth of ecommerce software products on the market, it’s never been a better time to jump into online selling. We think that any of the products reviewed here are strong choices that will get your small business up and running with an online shop.

While the best ecommerce platform for small business will depend on your specific needs and budget, we think that most will find Shopify provides the greatest overall value for the money.

How to Write Business Proposals

Businesswoman studying documents while standing

A business proposal is a documented, formal offer to provide a product and/or service to a potential buyer (a prospect). The proposal can be in response to a formal Request for Proposal (RFP) which is a solicitation issued by the prospect that is seeking bids from providers. The business proposal documents the provider’s bid. Other names for a business proposal are a sales proposal, consulting proposal or bid.

It typically includes brief description of the prospect’s problem, why you can solve it better than anyone else, your general approach to solving it and the approximate cost to solve it. It also includes brief description of your organization and the people who will be working on the problem.

Too often, the proposal writer uses one of the standard business proposal templates that guides the writer to produce a generic proposal. However, a proposal is much more likely to be convincing to the prospect if it is highly customized to the nature and needs of the prospect.

This article provides complete guidelines and extensive free resources to highly customize your business proposal.
All About Business Proposals

Carter McNamara, Authenticity Consulting, LLC

A Targeted Sales Letter Can Work Magic for Direct Marketing

Hand slipping a white paper into a brown envelope

Guest Author: Jan Hill

Targeted Sales Letter

Photo Credit: http://mrg.bz/L74uGu

Direct mail marketing need not be expensive or complicated. According to Forbes, a simple letter can be extremely powerful, all by itself. Whether you are planning to send a physical letter or an email, the elements of a successful sales letter stay the same.

When Letters Are Your Best Bet

There are times when a sales letter is most effective. One is when you notice that certain customers have stopped being your customers. A simple “We miss you and want you back” letter can encourage them to come back to you where an email may not have the same personal feeling and individualized effect. Conversely, an email can be scheduled to arrive in your customer’s inbox at a time that can maximize its effectiveness, so your approach will depend on your product or service and campaign goals.

According to Deliver magazine, if you’ve got a story to tell and it is going to take more than a few words, a sales letter is the way to go, especially if your product or service is costly — big purchases require more persuasion than small ones. Reply cards, coupons, a bulky item (to encourage that the mailer get opened), and customer testimonials can and should accompany your letter to increase its effectiveness.

Emailed sales letters are best when timing is crucial. For example, if you sell food products it might make sense to send an email around 3pm, when your target audience may be experiencing post-lunch low blood sugar and snacking might be front and center in their mind. Or, you might want to target customers in advance of a known event, like sending a sales email about stocking up on cyclist clothing before the largest bike ride of the year. Email sales letters pair nicely with online storefronts and impulse purchasing.

Introducing a new business? You need a letter to engage your target in your story. You can also share updates about your products or services and offer discounts with a well-crafted sales letter.

How to Write a Winning Letter for Direct Marketing Success

Tony Attwood of Hamilton House Mailings offers some tips for writing effective sales letters. First of all, there’s the headline. It should be powerful, get the reader’s attention, and be placed about one-fourth of the way down the page, where the eyes naturally fall.

Make sure your sales letter follows good design practices and has a positive visual impact. There are many sales letter templates available that will incorporate your company logo, branding, and colors to give the document your personal touch.

A sales letter should be easy to read, using short paragraphs of two or three sentences each, including lots of white space at the margins and between paragraphs. It should always be written to an individual, not a group, and have a tone meant to engage your readers in a conversation. It should sound like you do, casual and informal, not stiff, stilted, and filled with bizspeak.

Sales letters need to have staying power, according to Microsoft Business Hub. You need to make your letter memorable and encourage the reader to tuck it away for future reference. You can quickly build trust by placing an endorsement from a former client or associate at the top of your letter to quickly create interest.

Because many readers are skimmers, the first few words of each paragraph need to draw the reader in by addressing problems and offering a solution — “One argument might be…,” or, “The best way to solve this problem is…,” or “Potential benefits are…”

Don’t Forget Your Conclusion

Hopefully your letter has done the job of convincing your readers that they need your product or service. Now you need a good, persuasive closing, and a strong call to action, telling the readers what they should do next — call or email you, or say that you’ll get in touch with them. Then make sure you follow up by doing what you said you’d do.

A call to action should clearly state what you want your readers to do; make the action easy by including order blanks, postcards, or postage-paid envelopes. If it’s an email letter, make sure to include appropriate links to more information or contact forms. Provide a date by which you want the contact to respond; and give them a benefit to stimulate action. This benefit, sometimes referred to as a “clincher,” appears appropriately at the end of your sales letter. It serves to motivate your readers and emphasizes how your product or service will benefit them.

Author Bio:

Jan Hill is a freelance journalist who writes for VistaprintDeals.com, the official source for Vistaprint coupons for small businesses across the globe. Jan has covered marketing topics for many newspapers, magazines and business sites over the last 10 years.

4 Reasons Business Contracts Fall Apart

Man in blue shirt signing a business contract

Reasons for Lost ContractsGuest Author: Jon Tucker

Lost Contracts Mean Lost Revenue

Business contracts provide the legal framework for mutual agreement between two business entities. Mutual benefits are realized when the two sides offer products or services in exchange for compensation. However, problems may arise in business deals when one side or the other fails to deliver according to the terms in the contract. Since casual agreements will not provide sufficient protection against loss if an unforeseen event causes the contract to be breached, legal advice must be sought in the early stages of contract creation.
In order to avoid unpleasant surprises with respect to contract terms at a later stage of business deals, there are certain points that must be taken care of in every contract to create a legally binding agreement. They are as follows;

1. VALIDITY OF THE CONTRACT

A court of law has the final word in the validity of any business contract. Missing elements in the contract can prove to be costly and damaging to both parties. All valid contracts must possess these elements to be enforced in a court hearing.
Mutual consent, Offer and Acceptance – All parties in a contract must be allowed to enter into the agreement without any compulsion. Either party can claim that consent was not given voluntarily. So, a valid proof that the consent was freely given at the time of entering into the agreement is an important part of every contract. Acceptance of the contract terms are implied by the signatures at the end of the contract.
Sound mind – A person without sufficient mental capacity to agree to the terms of the contract would not be held to the agreement in court. For example; a party should not be in a mental state that would impair judgment, such as under the influence of alcohol or drugs.
Consideration – Both parties must exchange something of value that can be easily measured. Examples are exchange of money, tangible products or paid services. Any other arrangement is considered a gift in legal terms.
Legal purpose – A court of law will not enforce a contract for an act that is against any other law of the United States or its territories. For instance, two business entities cannot sign a legally-binding contract for prostitution, human trafficking or drug running.

2. BEWARE OF HANDSHAKES

The days of a binding handshake are long gone. Every business entity must be aware of the pitfalls of working with other businesses to accomplish a common goal. Strong business partnerships are rare. In the absence of a legally binding contract, breach of trust by one party will result in legal action from the other party which is a time taking procedure. Part of the lawsuit will also include legal fees associated with resolving the dispute. A contract will be binding on both parties only when all of the elements listed above are present.

3. WARNING ABOUT PARTNERSHIPS

Start-up business partnerships are formed without consideration of all the ways that the casual agreement can be breached. Both parties should discuss beforehand the ways that each person will contribute to the business. Failure of the business brings new challenges to the situation because personal and business assets are placed in jeopardy without careful legal planning. In such a situation, courts address the situation according to the state laws that apply at the time.
Business entrepreneurs must engage the services of a qualified attorney since partnerships fall under a different set of rules from standard contracts. Ignoring the possibility of failure can be costly when outstanding debts have to be paid from the personal assets of both partners. Verbal agreements concerning the use of financial resources will not stand up in court. Every aspect of the business life must be properly documented to prevent disastrous consequences for everyone involved.

4. LEGAL COSTS

There are attorneys with specific qualifications and experience who can provide legal advice before getting into different types of contracts. Use of the same attorney for each agreement will reduce the amount of time and effort needed to draw up new contracts in the future. Legal counsel will prove to be invaluable for the business owner who wishes to deal in multiple business agreements.
It is therefore recommended that both parties understand the requirements of a legally binding contract. Contracts must be refined and the negotiation steps should be completed with each new partner. Working under valid contracts will mitigate the risk of loss if personal or business problems cause one side to breach the contract terms.

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For more resources, see our Library topics Marketing and Social Networking.

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About the Author:

Jon Tucker is Director of ENotaryClasses.com, the leading provider of notary classes required by the State of California to become a notary public.

Improve Salesforce Security and Speed by Optimizing Firefox

Person working with a mouse on a desk laptop

Guest Author: Grace Beckett

Tips and Tricks

Mozilla’s Firefox is the recommended browser for optimum usage of Salesforce and the official Salesforce community vouches its reliability. Users have reported that the performance of the Salesforce platform magically improves when you use it with Firefox. There might be something in Firefox’s source code that is particularly compatible with Salesforce. There might have been certain modifications also made by the Mozilla development team to ensure that Salesforce will run smoothly on the browser. However, there are certain small tips and tricks that will increase the security and the speed of Salesforce while being used with Mozilla Firefox. Here are some of them.

Enable JavaScript

JavaScript is one of the most widely used programming languages for the designing of web pages and web applications. Salesforce is also developed using the JavaScript console and you will find that enabling this particular option will ensure that the Salesforce platform will work more smoothly than it already does. Depending on the version of Firefox that you have on your system, you will find the instructions for enabling JavaScript on the developer page of the Mozilla Group.

Accepting and Retaining Third Party Cookies Until Expiration

It is a well established fact that browser cookies are a threat to your privacy and security. That is the reason most users choose to reject the cookies and even delete them if they find that any have been saved. However, most people do not understand that cookies also help in some sites’ performance. They will retain essential information and with the help of this information, the response time of the site will also improve significantly.

When you instruct the Firefox browser to accept and retain the cookies, you will find that the performance of Salesforce platform also improves. This is because the Salesforce site also needs cookies for optimum performance. Once the cookies expire, there is no need to retain them and you can easily discard them by clearing the complete history.

Usage of SSL 3.0

SSL 3.0 is the latest secure link protocol that is being used by the Salesforce site. When you do not use this actively in your browser, you will find that compatibility mode will restrict the performance. On the other hand, using tools to enable SSL 3.0 will not only increase the performance but also boost the security of your site exponentially.

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For more resources, see our Library topics Marketing and Social Networking.

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About the Author:

Grace Beckett is a CRM and Cloud Applications expert. She writes extensively on emerging trends affecting the cloud and social media. One of her favorite cloud solutions is Cirrus Insight, the leading application for integration of Salesforce and Google Apps.

Close More New Business

Businessmen in suit shaking hands to close a contract

Offer an Iron-Clad Guarantee

In the last post, I introduced Lance Latham’s extraordinary strategy for building his LinkedIn network from zero to over 23,000 direct connects in 18 months. While interviewing him for the post, and reviewing his company’s website Metrilogics.com, I was enormously impressed with another business-building strategy he and his team have successfully employed.

Metrilogics offers a rock-solid guarantee that sets them apart from other consulting firms – giving them an important competitive advantage, and an edge that helps them close more new business.

The Metrilogics Savings Guarantee

According to their website, here’s their powerful guarantee – verbatim:

“Following the Opportunity Assessment, we will present our summary findings to the client’s senior management team, including the identified annualized savings opportunity, and recommendations to achieve those savings.

If the client’s management team makes the commitment to achieving these savings by following Metrilogics’ recommendations, then Metrilogics will embark on a Savings Project with the client organization for a defined time period to make the annualized savings a reality. Metrilogics will always guarantee client annualized savings of at least 3x the client’s project investment (= a guaranteed client ROI of at least 200%).

If – by the end of the project – client annualized savings exceed the original guaranteed dollar amount, Metrilogics won’t bill extra for the additional savings achieved.

In the unlikely event that the guaranteed annualized savings have not been achieved by the agreed-upon project end date, Metrilogics will either:

  1. Continue working without additional compensation until the annualized savings target is reached, OR
  2. Refund a portion of our compensation, proportionate to the guaranteed annualized savings shortfall.”

Management’s Insights about This Guarantee

Lance reports that their significant expertise (25+ years) and keen ability to identify savings within their clients’ operations gives them piece of mind about the potential risk they take on this guarantee. In fact, Metrilogics usually finds a greater percentage of savings than they project – the perfect example of another outstanding business fundamental; “Always Under-Promise and Over-Deliver”.

Metrilogics’ sweet spot is a mid-size company with 20-25 employees, conducting an 8 week engagement, finding $100,000 in bottom-line savings (though they regularly work with multi-billion dollar organizations). In a recent project, Lance is deservedly proud to report that in a 9 week engagement, they projected (and GURANTEED) $125,000 in savings. The result? $168,000 in savings – $43,000 and 34% higher than projected!

Lance and his team has never had to pay out on a guarantee. Rather, they have ALWAYS over-delivered. Bravo!

About Metrilogics

According to Metrilogics’ website and LinkedIn profile; “Metrilogics helps management teams achieve dramatic operational savings quickly. Through the Metrilogics process improvement approach, companies have achieved significant bottom-line cost savings, ranging from hundreds of thousands to millions of dollars per year — the larger the organization, the greater the savings!” You may contact Lance by phone: 317-441-6844 or email: Lance @ Metrilogics.com (no spaces).

What guarantee can your company offer? Tell us about it or offer a link.

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For more resources, see our Library topics Marketing and Social Networking.

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ABOUT Lisa M. Chapman:

Ms. Chapman’s new book, How to Make Money Online With Social Media: A Step-by-Step Guide for Entrepreneurs will be available very soon. With offices in Nashville Tennessee, but working virtually with international clients, Lisa M. Chapman serves her clients as a business and marketing coach, business planning consultant and social media consultant. As a Founder of iBrand Masters, a social media consulting firm, Lisa Chapman helps clients to establish and enhance their online brand, attract their target market, engage them in meaningful social media conversations, and convert online traffic into revenues. Email: Lisa @ LisaChapman.com

Survey of Marketing Executives’ Priorities

Challenges Shaping Marketing Strategies

What are the most pressing issues shaping America’s marketing leaders? Frost and Sullivan, co-sponsored by the Business Marketing Association, surveyed 437 executives to find out. Whether B-to-B, B-to-C or both, there is considerable overlap regardless of the business model.

Top External Factors

Key takeaways: the top three external factors impacting marketing strategies are overwhelmingly negative. Companies reported at least 71% of the time that these three factors negatively impacted them:

  • Adjusting to the economic downturn
  • Intensifying competition
  • Changes in customer buying behavior

Top Five Key Marketing Challenges

According to the results of the study, marketing executives are under pressure to focus on identifying new avenues of growth. Although the priority of these challenges may vary across business models, they are largely the same for all:

  1. Identify new, adjacent market strategies
  2. Identify new opportunities for existing products
  3. Measure marketing spending efficiency and effectiveness
  4. Prioritize content offerings to create maximum value with customers (ex: social media, white papers, benchmarking tools, etc.)
  5. Improve sales and marketing integration

Other Key Marketing Survey Take-Aways

Survey questions revealed some surprising results:

  • On average, B-to-C companies have larger marketing budgets, allocating twice the amount of revenue to marketing as companies with other business models (8.5% for B-to-C vs. 3% for B-to-B or Hybrid models.)
  • B-to-B companies spend 50% more of their marketing budget on online media vs B-to-C companies.
  • Marketing executives predict either maintaining their existing marketing staff levels, or moderately recruiting new staff.
  • They also believe that budget cuts are over – optimistically expecting moderate or substantial increases in budgets.

Marketers believe that the economy is rebounding, and predict a moderate increase in their company’s performance going forward. With such increases, they anticipate their marketing budgets to increase, too.

(Thanks to Frost & Sullivan’s “Growth Team Membership” research.)

What are YOUR predictions for overall business growth? For marketing budgets? Why?

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For more resources, see our Library topics Marketing and Social Networking.

.. _____ ..

ABOUT Lisa M. Chapman:

Ms. Chapman’s new book, How to Make Money Online With Social Media: A Step-by-Step Guide for Entrepreneurs will be available very soon. With offices in Nashville Tennessee, but working virtually with international clients, Lisa M. Chapman serves her clients as a business and marketing coach, business planning consultant and social media consultant. As a Founder of iBrand Masters, a social media consulting firm, Lisa Chapman helps clients to establish and enhance their online brand, attract their target market, engage them in meaningful social media conversations, and convert online traffic into revenues. Email: Lisa @ LisaChapman.com