Chapter Five, “The Five Smart Steps,” outlines David McMahon’s practical framework for improving cash flow and profitability in retail by managing inventory and customer demand more intelligently. The SMART acronym stands for: Spot your best sellers, Maintain your winners, Auto-identify and act on non-sellers (“dogs”), Reward high gross margin sales, and Target marketing through customer segmentation.

David explains the 80/20 reality of retail: a small portion of SKUs generate most margin dollars, so retailers must regularly rank items, educate staff on top performers, and keep best sellers in stock to avoid costly hidden sales losses. He emphasizes using systems (and modern tools like AI) to flag aging inventory early and take decisive action—markdowns, redisplay, incentives, or vendor returns—to improve turns and protect overall margin. He also describes aligning sales compensation with profitability through variable commission or margin-based bonuses. Finally, he stresses that the biggest gains come from targeted relationship marketing: segmenting the customer database, treating top customers like a VIP group, and sending relevant, timely messages that drive repeat business and loyalty.