Black Friday is a marketing stunt – but just as much a financial one
Black Friday is a marketing stunt – but just as much a financial one
Black Friday is decided before it goes live
Most companies spend the months leading up to Black Friday on campaign material: messaging, ads, website updates, stock levels. There is good reason why that takes up the most space – it is what customers see.
But the decision that really determines whether the day becomes a financial success or an expensive mistake is rarely made in the marketing department. It is made in the same months, just somewhere else: in the discount level, in how orders are put together, in the plan for new customers, in cash flow, in the plan for what doesn’t sell – and what sells out. These are the decisions worth getting right before the campaign goes live.
Set the discount level based on the numbers, not on your competitors
The most common starting point for a Black Friday discount is whatever you usually offer, or whatever your competitors are advertising. It’s an understandable shortcut, but it’s the wrong basis for the decision, because it ignores what actually matters: how much room is there really in the margin to give that discount, and how much more do you need to sell for it to still be good business?
That decision should be locked in before the campaign is written – not adjusted at the last minute because a competitor has just raised their discount. Set a ceiling for how far the discount can go, based on what the business can actually carry, and stick to that ceiling even when it feels tempting to outbid. That discipline is easier to maintain if it was decided calmly, months before the campaign goes live, than if it has to be defended in the middle of the rush of the campaign itself.
The numbers only hold up if marketing is included. Ads, boosted posts, affiliates and any PR effort around the campaign are real costs. They don’t sit outside the accounts, and they have to be deducted from the same margin as the discount. A campaign can therefore look healthy if you only look at cost of goods and discount, but end up loss-making once you add the marketing budget that was supposed to drive the volume. The margin that has to carry the discount is what’s left after marketing has been paid for. Not before.
Decide what a “good order” means before you set the discount
It’s easy to plan a campaign around what the products cost and forget what each order actually costs. Shipping, payment fees, handling and returns all add to the cost of each order, and on Black Friday those extra costs can quickly eat up a large share of the margin the discount has already reduced.
It’s also worth being honest about what Black Friday is actually meant to achieve. Should the campaign generate profit on the day, or is it just as much an investment in new customers and brand awareness? If you deliberately accept a lower margin to bring in a new customer, that isn’t necessarily bad economics. But then it has to be treated as an investment, not just as a discount. How much can you afford to spend to acquire the customer, and what do you expect that customer to be worth over time? Only when the expected value justifies the investment do you know whether a low-margin order is actually a good order.
A Black Friday strategy example is to cut prices on your core products (the bread and butter) to drive traffic and volume, while raising prices on add-ons people buy alongside them, which protects the overall margin on each basket.
It also means that not every product necessarily has to serve the same purpose. Some can be deliberate entry products, where the goal is to get new customers through the door, while others need to contribute more directly to earnings. This requires the economics behind the two types of orders to be thought through differently – and knowing what you’re willing to earn on the first order if the expectation is that the customer will come back and buy again.
Finally, expected returns should be part of the calculation from the start. If experience shows that, for example, 20% of orders on certain products are returned, that isn’t a surprise that should turn up in January. It’s a cost that should be factored in when you decide which offers and discounts you can actually afford.
Decide what should happen with new customers – now
Black Friday is one of the best days of the year for acquiring new customers, but only if there is a plan for what happens to them afterwards. Without that plan, most new Black Friday customers become one-off buyers, and the entire investment in acquiring them, through discounts and marketing, is never recouped.
That plan should be in place before the campaign starts, not invented afterwards. It isn’t necessarily about getting the customer to buy again straight away, but about knowing how Black Friday customers fit into the overall customer journey, and what will make them choose the company again once the discount is gone. That might be through the product experience, the brand, customer communication or other parts of the commercial strategy. The point is that if Black Friday is used to invest in new customers, there also needs to be a plan for how that investment creates value after the campaign.
Make sure your cash flow can carry the plan – don’t just hope it can
Stock for Black Friday is planned and ordered months in advance. That means money often leaves the business long before it comes back. As long as sales go as expected, nobody notices. But if sales come in even slightly below expectations, the picture can change quickly.
The same applies if returns and refunds delay incoming payments. The money reaches the account later, while supplier invoices still fall due. This is where cash flow can come under pressure – and it often happens precisely when the company has the most money tied up in inventory.
That’s why it’s worth drawing up a cash flow plan for the entire period, not just for the campaign day itself. How long can the business cope with sales coming in lower than expected? When are the largest supplier invoices due? And when does the money from sales actually land in the account?
It’s also worth having a buffer in case something moves more slowly than planned. Conversely, there should be a plan for what you’ll do if sales move faster than expected. Can you adjust purchasing? Can you reorder quickly enough? And does it make sense to pay for, for example, faster production or air freight to avoid stock-outs?
The most important thing isn’t hitting expectations. It’s being prepared when you don’t. That plan is far easier to put together calmly, months before Black Friday, than to improvise once the invoices are already overdue.
Have a plan B for unsold stock – and a plan C for stock-outs
Most campaigns are planned as if everything will sell as expected. In reality, it rarely does. Some products sell more slowly than hoped, and part of what actually sells comes back in the weeks that follow. Without a plan for both, the surplus volume ends up as a problem that arises after the campaign, rather than a decision made before the campaign went live.
It’s worth deciding in advance what should happen to products that haven’t sold when the campaign ends: should they be sold on at a reduced price in a following period, moved to another sales channel, or left sitting there, tying up warehouse space and capital? The same goes for returns. Without a clear process for how quickly returned products are made ready for sale again, how much can realistically be resold, and how much ends up as a loss, the company risks sitting with capital tied up in products that are neither sold nor written off, in the months after the campaign has actually ended.
Stock-outs are another real concern. There is a risk of missing out on sales and limiting growth. With proper tracking of how fast products are selling during the period, discounts can be adjusted in real time, making it possible to prevent stock-outs while also taking home more profit. For Black Month or other longer campaign periods, it’s worth considering stand-by production with air freight or other initiatives for fast restocking.
These plans should be ready at the same time as the rest of the campaign – not emerge as a firefighting exercise in January, when inventory and cash flow are already showing that something didn’t go as expected.
The bottom line
None of these five decisions require a new system or a major overhaul. They require someone to sit down before the campaign goes live and take a position on discounts, order economics, the customer plan, purchasing, cash flow and leftover stock with the same thoroughness that goes into the campaign material itself.
Black Friday doesn’t become a financial success because revenue is high on the day. It becomes one because the decisions behind it were in place long before customers started clicking.
At Scaleup Finance, our E-commerce & Retail Team specialises in supporting the decisions behind major campaigns. We help CEOs, founders and finance professionals get those decisions right and make sure the campaign becomes a success – so that volume turns into healthy business, not just a big number on the day. If that sounds like a conversation worth having, we’d love to hear from you.
Black Friday is decided before it goes live
Most companies spend the months leading up to Black Friday on campaign material: messaging, ads, website updates, stock levels. There is good reason why that takes up the most space – it is what customers see.
But the decision that really determines whether the day becomes a financial success or an expensive mistake is rarely made in the marketing department. It is made in the same months, just somewhere else: in the discount level, in how orders are put together, in the plan for new customers, in cash flow, in the plan for what doesn’t sell – and what sells out. These are the decisions worth getting right before the campaign goes live.
Set the discount level based on the numbers, not on your competitors
The most common starting point for a Black Friday discount is whatever you usually offer, or whatever your competitors are advertising. It’s an understandable shortcut, but it’s the wrong basis for the decision, because it ignores what actually matters: how much room is there really in the margin to give that discount, and how much more do you need to sell for it to still be good business?
That decision should be locked in before the campaign is written – not adjusted at the last minute because a competitor has just raised their discount. Set a ceiling for how far the discount can go, based on what the business can actually carry, and stick to that ceiling even when it feels tempting to outbid. That discipline is easier to maintain if it was decided calmly, months before the campaign goes live, than if it has to be defended in the middle of the rush of the campaign itself.
The numbers only hold up if marketing is included. Ads, boosted posts, affiliates and any PR effort around the campaign are real costs. They don’t sit outside the accounts, and they have to be deducted from the same margin as the discount. A campaign can therefore look healthy if you only look at cost of goods and discount, but end up loss-making once you add the marketing budget that was supposed to drive the volume. The margin that has to carry the discount is what’s left after marketing has been paid for. Not before.
Decide what a “good order” means before you set the discount
It’s easy to plan a campaign around what the products cost and forget what each order actually costs. Shipping, payment fees, handling and returns all add to the cost of each order, and on Black Friday those extra costs can quickly eat up a large share of the margin the discount has already reduced.
It’s also worth being honest about what Black Friday is actually meant to achieve. Should the campaign generate profit on the day, or is it just as much an investment in new customers and brand awareness? If you deliberately accept a lower margin to bring in a new customer, that isn’t necessarily bad economics. But then it has to be treated as an investment, not just as a discount. How much can you afford to spend to acquire the customer, and what do you expect that customer to be worth over time? Only when the expected value justifies the investment do you know whether a low-margin order is actually a good order.
A Black Friday strategy example is to cut prices on your core products (the bread and butter) to drive traffic and volume, while raising prices on add-ons people buy alongside them, which protects the overall margin on each basket.
It also means that not every product necessarily has to serve the same purpose. Some can be deliberate entry products, where the goal is to get new customers through the door, while others need to contribute more directly to earnings. This requires the economics behind the two types of orders to be thought through differently – and knowing what you’re willing to earn on the first order if the expectation is that the customer will come back and buy again.
Finally, expected returns should be part of the calculation from the start. If experience shows that, for example, 20% of orders on certain products are returned, that isn’t a surprise that should turn up in January. It’s a cost that should be factored in when you decide which offers and discounts you can actually afford.
Decide what should happen with new customers – now
Black Friday is one of the best days of the year for acquiring new customers, but only if there is a plan for what happens to them afterwards. Without that plan, most new Black Friday customers become one-off buyers, and the entire investment in acquiring them, through discounts and marketing, is never recouped.
That plan should be in place before the campaign starts, not invented afterwards. It isn’t necessarily about getting the customer to buy again straight away, but about knowing how Black Friday customers fit into the overall customer journey, and what will make them choose the company again once the discount is gone. That might be through the product experience, the brand, customer communication or other parts of the commercial strategy. The point is that if Black Friday is used to invest in new customers, there also needs to be a plan for how that investment creates value after the campaign.
Make sure your cash flow can carry the plan – don’t just hope it can
Stock for Black Friday is planned and ordered months in advance. That means money often leaves the business long before it comes back. As long as sales go as expected, nobody notices. But if sales come in even slightly below expectations, the picture can change quickly.
The same applies if returns and refunds delay incoming payments. The money reaches the account later, while supplier invoices still fall due. This is where cash flow can come under pressure – and it often happens precisely when the company has the most money tied up in inventory.
That’s why it’s worth drawing up a cash flow plan for the entire period, not just for the campaign day itself. How long can the business cope with sales coming in lower than expected? When are the largest supplier invoices due? And when does the money from sales actually land in the account?
It’s also worth having a buffer in case something moves more slowly than planned. Conversely, there should be a plan for what you’ll do if sales move faster than expected. Can you adjust purchasing? Can you reorder quickly enough? And does it make sense to pay for, for example, faster production or air freight to avoid stock-outs?
The most important thing isn’t hitting expectations. It’s being prepared when you don’t. That plan is far easier to put together calmly, months before Black Friday, than to improvise once the invoices are already overdue.
Have a plan B for unsold stock – and a plan C for stock-outs
Most campaigns are planned as if everything will sell as expected. In reality, it rarely does. Some products sell more slowly than hoped, and part of what actually sells comes back in the weeks that follow. Without a plan for both, the surplus volume ends up as a problem that arises after the campaign, rather than a decision made before the campaign went live.
It’s worth deciding in advance what should happen to products that haven’t sold when the campaign ends: should they be sold on at a reduced price in a following period, moved to another sales channel, or left sitting there, tying up warehouse space and capital? The same goes for returns. Without a clear process for how quickly returned products are made ready for sale again, how much can realistically be resold, and how much ends up as a loss, the company risks sitting with capital tied up in products that are neither sold nor written off, in the months after the campaign has actually ended.
Stock-outs are another real concern. There is a risk of missing out on sales and limiting growth. With proper tracking of how fast products are selling during the period, discounts can be adjusted in real time, making it possible to prevent stock-outs while also taking home more profit. For Black Month or other longer campaign periods, it’s worth considering stand-by production with air freight or other initiatives for fast restocking.
These plans should be ready at the same time as the rest of the campaign – not emerge as a firefighting exercise in January, when inventory and cash flow are already showing that something didn’t go as expected.
The bottom line
None of these five decisions require a new system or a major overhaul. They require someone to sit down before the campaign goes live and take a position on discounts, order economics, the customer plan, purchasing, cash flow and leftover stock with the same thoroughness that goes into the campaign material itself.
Black Friday doesn’t become a financial success because revenue is high on the day. It becomes one because the decisions behind it were in place long before customers started clicking.
At Scaleup Finance, our E-commerce & Retail Team specialises in supporting the decisions behind major campaigns. We help CEOs, founders and finance professionals get those decisions right and make sure the campaign becomes a success – so that volume turns into healthy business, not just a big number on the day. If that sounds like a conversation worth having, we’d love to hear from you.
FAQs
All the answers you need for all the questions you’ve got.
(But also TL;DR)
How should a startup business prepare its budget?
To prepare a budget for your startup, begin by listing all potential expenses you anticipate in starting and operating your business. Next, organise these expenses into categories. After that, estimate your monthly revenue and calculate the total costs required to start and run your business.
What are the key steps to creating an effective budget?
Step 1: Determine and track your income sources.
Step 2: Make a list of your cost. Include both fixed and variable costs.
Step 3: Set achievable financial goals.
Step 4: Develop a plan to meet those goals.
Step 5: Put everything together to build your budget.
Step 6: Regularly review and revise your forecast to ensure it remains effective.
What does capital budgeting entail for a startup?
Capital budgeting for a startup involves allocating a set amount of funds for specific purposes, such as purchasing new equipment or expanding business operations. This process is crucial as it supports making strategic investments that are expected to yield long-term benefits for the startup.
FAQs
All the answers you need for all the questions you’ve got.
(But also TL;DR)
How can a startup forecast its cash flow?
To forecast cash flow for a startup, follow these steps:
Step 1: Create a sales forecast by estimating the revenue your products or services will generate over the forecast period.
Step 2: Develop a profit and loss forecast to understand your expected expenses and income.
Step 3: Prepare your cash flow forecast, which involves calculating expected cash inflows and outflows. This can often be done for longer-term by using assumptions around payment terms to forecast a Balance Sheet, and using the movements in Balance Sheet and Net Profit/Loss to calculate the cashflow.
Step 4: Consider ways of improving cash flow by improving your invoicing methods, considering short-term borrowing, and negotiate better payment terms to manage cash flow effectively.
What is the most accurate method to forecast cash flow?
The most accurate method for forecasting cash flow in the short-term is the direct method, which utilises actual cash flow data. In contrast, the indirect method is better suited for longer term forecasting using projected balance sheet movements and income statements to estimate future cash flows.
How is cash flow calculated?
Cash flow is calculated by deducting cash outflows from cash inflows over a specific period. This calculation alongside forecasts of future cash flow helps determine if there is sufficient money available to sustain business.
How do you project cash flow over three years?
To project cash flow over a three-year period, undertake the following steps:
Step 1: Collect historical financial data.
Step 2: Identify all expected cash inflows, which could include revenue, investment, grant income, etc.
Step 3: Estimate all anticipated cash outflows including expenses, suppliers that need to be paid, investments into assets, debt repayments, etc.
Step 4: Calculate the net cash flow by subtracting outflows from inflows.
Step 5: Consider your cash reserves and explore financing options if needed.
Step 6: Regularly review and adjust your projections to ensure accuracy and relevance.
FAQs
All the answers you need for all the questions you’ve got.
(But also TL;DR)
When should a startup consider hiring a CFO?
A startup should think about hiring a Chief Financial Officer (CFO) when it begins to experience rapid growth, finds it challenging to manage finances, or needs to navigate complex investment scenarios. A seasoned financial professional can provide the necessary expertise to handle these challenges effectively.
What are the indicators that my business might need CFO support?
You might need to hire a CFO or consider outsourcing this role if you notice any of the following signs: a decrease in gross profit margins despite increasing revenue, uncontrolled business growth, lack of cash reserves despite having a financially successful year, or a halt in business growth.
Does my startup really need a full-time CFO?
Recruiting a full-time CFO is an expensive hire. Given budget constraints and the need to prove the viability of your business idea, founders will often need to prioritise investing into building and commercialising their product. That's where CFO services for startups are a cost-effective solution for founders looking to take their financial management to the next level.
