Before deciding to close a store, check how much you earn on the goods you sell, whether that covers day-to-day expenses, and when your available cash will run out. You need data on sales and returns, cost of goods sold, inventory, expenses, and payment due dates. This will help you identify which changes to assess: prices, purchasing, discounts, rent, opening hours, or sales methods.
Calculate margin, break-even sales, and how long available cash will last, then compare several ways of operating the store. The 14-day plan below will help organize the review. It does not guarantee that the store will stop making losses: the decision depends on actual demand, expenses, debts, and how much more the owner is willing to invest.
Gather data for the same period
Start with the most recent complete month. Then compare it with previous months and, for seasonal merchandise, with the corresponding season. Do not treat the results of a holiday week as representative of a regular month without adjusting for demand.
The owner sets the period and makes the decision. The accountant or employee responsible for bookkeeping reconciles amounts and documents. The store manager checks actual inventory, returns, and sales staff performance. If one person handles all these tasks, work through each step in sequence.
- Collect sales after discounts and returns. Do not deduct a discount a second time if it is already reflected in the sales amount.
- Determine the cost of the goods actually sold using supplier invoices and accounting records. Check whether the cost includes the purchase and delivery of goods to the store. If you deduct returns from revenue, reconcile the corresponding adjustment to the cost of goods sold as well. Payments for all purchases made during the month are not the same as the cost of goods sold: some goods may still be in stock.
- Collect expenses for rent, staff, utilities, advertising, packaging, delivery, bank fees, and other store needs for the period selected. Separate these from cash payments: a prepayment or repayment of an old debt may relate to another period. Check where the cost of written-off, damaged, and missing goods identified during stocktaking is recorded. Count each expense once; do not add delivery costs again if they are already included in the cost of goods sold.
- Reconcile cash balances in registers and bank accounts against cash records and bank statements.
- List debts, expected receipts, and upcoming payments with specific dates.
- Check inventory, delivery dates, recent sales, write-offs, and discrepancies found after stocktaking.
If the store is registered for value-added tax (VAT), calculate revenue excluding VAT. Ask your accountant which VAT amounts included in the cost of goods and other expenses can be excluded from the calculation and which remain store expenses. Eligibility for an input tax credit and a VAT refund from the budget should be checked separately. Show actual receipt and payment amounts in the cash calendar. Use the same approach for every period you compare.
Check what remains from revenue
Gross profit and gross margin
Gross profit is revenue minus the cost of the goods sold. The store uses it to cover its other expenses. Gross margin shows what share of revenue this profit represents.
Gross profit = revenue − cost of goods sold.
Gross margin = gross profit ÷ revenue × 100%. Calculate gross and operating margins and the contribution margin ratio using the formulas below only when revenue is positive. If revenue is zero or negative after returns, show sales, returns, expenses, and the result in hryvnias separately. The formula is provided in the financial ratios guide.
Margin and markup use different bases for calculation. Example: a product costing 700 Ukrainian hryvnias (UAH) is sold for UAH 1,000. Gross profit is UAH 300, margin is 30% of the selling price, and markup is approximately 42.86% of cost. You cannot substitute markup for margin when calculating break-even sales.
Calculate the result by category and sales channel. To identify the causes of low revenue, compare the number of completed purchases and the average transaction value across similar periods. Calculate the average transaction value as sales after discounts divided by the number of purchases; check returns separately. If you track store visitors, check what share of them make a purchase. Find out whether the products customers wanted were in stock, whether prices changed, and whether customers got answers to their questions. For online orders, check fees, packaging, delivery paid for by the store, and return costs separately. A category with a high percentage margin may generate little profit in hryvnias if it sells infrequently.
Operating result and operating margin
The operating result shows what remains after the cost of goods and the expenses of running the store. Include rent, payroll, advertising, utilities, and other operating expenses, including depreciation of equipment—the portion of its cost gradually charged as an expense over its useful life, if depreciation is recorded in your accounts. High rent and staffing costs can reduce this result even when gross profit is substantial.
Operating result = gross profit − other operating expenses.
Operating margin = operating result ÷ revenue × 100%. The calculation method is described in the operating margin guide.
Separately check taxes under your tax system, loan interest, and other amounts not included in this calculation. The operating result does not yet show the owner's final profit. Record repayment of loan principal and withdrawals by the owner in the payment calendar so you can see their effect on the cash balance.
Example calculation: sales are coming in, but the store is losing money
Suppose the store had monthly revenue of UAH 300,000 after discounts and returns. The cost of goods sold was UAH 210,000, and fixed operating expenses were UAH 105,000. This simplified example assumes there are no other variable expenses; taxes and financing expenses are excluded.
| Metric | Calculation | Monthly result |
|---|---|---|
| Gross profit | 300,000 − 210,000 | UAH 90,000 |
| Gross margin | 90,000 ÷ 300,000 × 100% | 30% |
| Operating result | 90,000 − 105,000 | −UAH 15,000 |
| Operating margin | −15,000 ÷ 300,000 × 100% | −5% |
| Break-even revenue | 105,000 ÷ 0.30 | UAH 350,000 |
On these assumptions, the store is short UAH 15,000 in gross profit needed to cover operating expenses. An additional UAH 50,000 in revenue will generate that amount only if the 30% margin and fixed expenses remain unchanged. If increasing sales requires more advertising, another employee, or deeper discounts, recalculate the result.
Calculate break-even sales with all variable expenses
For an actual store, first determine contribution margin—the amount left from revenue after all variable expenses. These include the cost of goods sold and expenses that vary with sales, such as a fee on each payment or packaging for each order. This amount must cover fixed expenses. Ask your accountant which taxes and mandatory payments depend on sales and which do not change with sales volume, and assign them to the appropriate group without counting them twice. If you calculate break-even for operations only, state explicitly which taxes and financing expenses are excluded.
Contribution margin ratio = (revenue − variable expenses) ÷ revenue.
Break-even revenue = fixed expenses ÷ contribution margin ratio. The general principle is provided in the retail calculations guide.
Enter the ratio as a decimal: for 30%, use 0.30. If the ratio is zero or negative, increasing sales under the same conditions will not cover fixed expenses. You must first change prices, cost of goods, or other variable expenses.
For multiple categories, use the overall contribution margin ratio, weighted by each category's share of revenue. A simple average of the percentages will give a misleading result if one category sells much more than another. Recalculate the ratio after changing the product mix or discounts.
Compare the required revenue with actual sales in similar periods. Write down how many additional purchases or what average transaction value would be needed to reach it, and where those customers might come from. The calculation alone does not confirm that the store can generate that level of demand.
Estimate how long your cash will last
A monthly loss and a decrease in the cash in your account can differ. The store may buy inventory in advance, pay off an old debt, or still be waiting for payment for orders already fulfilled. So calculate how long your cash will last using actual receipts and payments.
Prepare a payment calendar with the date, available opening balance, expected receipts, payments, and closing balance. List payments by day for the next two weeks and by week after that. Include purchases, rent, payroll, taxes, customer refunds, loan payments, and any money the owner plans to withdraw from the business for personal needs.
If monthly payments consistently exceed receipts, estimate how many months your cash will last by dividing available cash by net monthly outflow. This principle is described in the business cash management guide.
Separate example: a store has UAH 60,000 in available cash and forecasts UAH 280,000 in receipts and UAH 300,000 in payments per month. Net outflow is UAH 20,000 per month, so the available cash will last approximately 3 months. These are different starting figures from the profitability example. If a large payment falls at the start of the month, a cash shortfall may occur sooner.
Do not count expected proceeds from all remaining inventory, an unconfirmed loan, or promised support as available cash. If net monthly outflow is zero or negative, this formula cannot determine how long the cash will last: check the payment calendar and a scenario in which receipts decline. There is no single number of months for which available cash should last that applies to every store.
Check products that have been sitting unsold
Dead stock is merchandise that remains unsold for too long and is difficult to sell on acceptable terms. Funds have been spent on this unsold inventory, and the goods occupy space. This impact is described in the article about unsold inventory.
Value inventory at its purchase cost, and estimate possible proceeds from selling it separately. A price tag totaling UAH 100,000 does not mean the store will receive UAH 100,000: customers may not accept the price, and selling may require discounts and additional expenses.
- Find products with no sales during the period selected and check the date of the last sale.
- Compare stock on hand with the sales rate and upcoming deliveries.
- Check product condition, seasonality, and expiration dates, if applicable.
- Find out whether the supplier allows returns or exchanges, and on what terms.
- Decide on an action for each group: stop reordering, change the display, offer a bundle, test a different price, or arrange a return.
Do not set the same time limit for every category: a winter coat, a daily consumable, and an expensive tool have different sales cycles. Do not forecast proceeds from a supplier return until the supplier has confirmed the amount and timing.
Check what discounts cost
A discount reduces the amount the store receives per item and may lower the margin. Before running a promotion, calculate profit after the discount and the sales volume required. The effect of discounts on margin is discussed in the article on planning retail promotions.
Example: a product is priced at UAH 1,000 and costs UAH 700. Without a discount, gross profit per item is UAH 300. After a 10% discount, the price is UAH 900, profit is UAH 200, and margin is approximately 22.22%. To earn the same total gross profit, you would need to sell 50% more units, assuming cost per unit stays the same and there are no other variable expenses.
With a 20% discount in this example, the price would be UAH 800 and profit would be UAH 100 per item. You would need to sell three times as many units to earn the same total gross profit. This calculation shows the volume required; it does not prove that the promotion will generate those sales.
For old inventory, compare the possible proceeds after selling costs with the cost of continued storage and the expected loss in the goods' value. For products you regularly reorder, check whether profit after the promotion will cover fixed expenses. Separate the promotion's results from regular sales.
Review rent and other expenses
List recurring expenses with their amount, payment due date, responsible person, and terms for changing them. Check the lease, additional charges, utility bills, advertising accounts, subscriptions, and services the store actually uses.
For each possible change, record the expected monthly savings and one-time costs. For example, moving to a smaller space may reduce rent but require relocation, equipment, and time to restore sales. Assess shorter opening hours by checking sales and contribution margin during those hours, as well as which expenses would actually decrease.
Discuss a rent reduction or payment deferral with the landlord and put agreed terms in writing. Until confirmed, keep the current amounts and due dates in the calendar. A deferral moves a payment and may help with a temporary cash shortfall, but it does not reduce the store's expenses by itself.
Assess the owner's labor separately. If the owner works without compensation, determine how much the business should provide in the future. This will show whether the result is acceptable to the owner even after the store reaches operating break-even.
Check repeat purchases
Calculate the share of customers who made more than one purchase during the period selected: number of such customers ÷ all customers who made purchases during that period × 100%. This is how the metric is defined in the e-commerce metrics guide.
Example: 200 customers made purchases during a quarter, and 40 of them bought more than once. The share is 20%. This metric differs from the share of customers who had purchased before the quarter began.
To calculate this, you need to identify the same customer across purchases, for example by an unchanged loyalty card number. Merge duplicates and decide in advance how you will treat canceled orders and orders for which all goods have been returned. If some purchases are anonymous, state in your report what share of sales the data covers. If there are no customers, the metric cannot be calculated.
Choose a period that suits the product: it will differ for everyday purchases and furniture. Alongside the share of repeat customers, check the profit from their orders after discounts and other variable expenses.
As a practical test, you could offer a relevant complementary product to customers making an in-store purchase. You may notify a customer when an item arrives if they asked you to do so. Set the test budget and evaluation method in advance: additional completed purchases and contribution margin after expenses. A discount offered to the entire customer list requires a separate calculation.
Torgsoft reports for checking deliveries and cash flow
In Torgsoft, open “Analysis → Incoming Invoice Profitability Analysis.” Select an invoice or delivery batch, accounting center, and analysis date; after changing filters, click “Refresh.” The report shows sales from the invoice creation date up to the selected time, remaining stock and its purchase cost, returns, discounts, revenue, and profit. This helps you check what share of a delivery has already sold and how much money remains invested in unsold goods. The procedure is provided in the report instructions.
To analyze losses, check the “Include write-offs when calculating profit” toggle. For sold goods, the report lets you review quantity, price, discount, and sales profit. Compare this data with your own promotion calculation. The profit on goods in an invoice is not the store's full operating result: rent, staff, and other expenses must be counted separately.
To review cash flow, open “Payment → Balance by Financial Analysis Items,” then select the period, store location, and currency. The report groups financial transactions by item and shows receipts, expenses, and balance. Use “Transactions...” to check the details of a specific item. First make sure all required transactions have been entered and assigned to the correct items. Use the report to review past payments, and enter future due dates in your payment calendar. Settings are described in the instructions for the balance by financial analysis items.
A practical 14-day store review plan
This is a suggested workflow. It helps allocate tasks and gather data for a decision. If the calendar already shows a cash shortfall for an upcoming payment, the owner should address it immediately rather than wait until all the steps are complete.
| Days | Who is involved | What to check | What to produce |
|---|---|---|---|
| 1–2 | Owner and employee responsible for bookkeeping | Reconcile sales, returns, cost of goods sold, cash, accounts, and debts for one period | Agreed starting data and a list of discrepancies to correct |
| 3–4 | Owner and accountant | Calculate gross and operating results and margins for the store and its main categories | Profit or loss amount and each category's contribution to the result |
| 5–6 | Owner and accountant | Separate fixed and variable expenses, determine break-even sales, and prepare a payment calendar | Required revenue and dates when a cash shortfall may occur |
| 7–8 | Store manager and person responsible for purchasing | Check inventory, old deliveries, write-offs, and discount results | A list of products with specific actions and forecast proceeds |
| 9–10 | Owner | Review rent, opening hours, services, and other recurring expenses | Savings options with one-time costs and confirmed terms |
| 11–12 | Owner or person responsible for sales | Calculate repeat purchases, check their profitability, and choose a small test | A metric with a defined period, test budget, and evaluation method |
| 13–14 | Owner | Compare operating without changes, operating with specific changes, and stopping sales at this location | A decision, responsible people, dates for the next review, and a limit on additional investment |
How to decide after the review
For each option, record forecast revenue, contribution margin, fixed expenses, one-time payments, and cash balance. Note the data behind each assumption. A cost reduction backed by a signed agreement and an expected increase in sales after future advertising have different levels of certainty.
If you are considering stopping sales at the location, prepare a calendar of receipts and payments through the end of the settlement process. Include possible proceeds from remaining inventory and equipment after selling costs, debts, unfinished orders, and customer refunds. Separately check possible employee payments, taxes, relocation or storage costs for goods, rent due through the end of the lease, deposit return terms, and termination of paid services. Do not include an unapproved deposit refund as a confirmed receipt. Reconcile amounts and dates against contracts and with the accountant; check employee terms and disputed obligations with a specialist in the relevant area of law.
Before testing changes, set an evaluation date, a maximum amount of additional investment, and the required result in hryvnias. For example, determine the contribution margin needed to cover the test costs and the cash shortfall the owner can fund. After the test, compare the plan with the actual result and update the payment calendar.
The decision to continue operating should be based on an achievable sales volume, confirmed cost changes, and enough cash for the review period. If the calculation depends on unconfirmed demand growth or new investment above the limit set by the owner, reconsider the operating format or the decision about this location.
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