3 minute read
From The President
FOR THE LOVE OF MONEY
Focus on profit over procrastination.
Assuming your business was created to be a profit center, your goals include selling goods and services at a profit sufficient to run and grow your business. With that assumption in place, it may be time to review your profitability.
When business is good, few take the steps to review their expenses. Instead, we tend to become complacent, feeling that we’re doing well enough that we don’t need to focus on this important part of the business. Most business owners will still focus on getting the best deal when purchasing products, hoping sufficient margins will carry them through. However, there’s much more to making sure you are running a profitable business.
Cost Savings
Cutting or reducing unnecessary costs should be a scheduled task each month, or at the very least, each quarter. If left unchecked, so many areas can become a drain on profits. I recommend making a list that includes items such as monthly service subscriptions, miscellaneous shop and cleaning supplies, utilities, payment processing and HR benefit costs to name a few. Look for common recurring costs that can be reduced. Also, make a list of things you could do without, especially if they would have little or no impact on your operation. Once your list is complete, rank the items in cost order. Look at both monthly and annualized costs.
Maximize Your Purchase Power
This is just as important for a small volume dealer as it is for a large one. Do not fall into the trap of thinking that just because you don’t buy much, you can’t negotiate a better price. Start with your top ten products purchased. Do some math. How many units do you purchase per year? Now, per month. Look at what you are paying including freight costs. Next, contact your vendor. This includes your distributor if that’s where you purchase. Offer the idea of scheduled purchase orders for a quantity equal to your annual purchases in return for some cost consideration. Also, ask for some return allowance for stock balancing should one of these top movers slow down based on factors out of your control. Additionally, request consideration for changing the forecast should you need to get more or less product based on an increased or decreased sales rate. Partnering with your vendors in this way helps them forecast, allowing them to buy better and pass these savings on to you. Not every vendor will provide this consideration, but if you ask them all, you’ll most likely find some that will be happy to provide better pricing in return for your forecast and scheduled purchase orders.
Adding to Each Sale
What can ten dollars do for you? Well, adding an additional ten dollars to each sale could bring you a pleasant surprise at the end of your fiscal year. Based on research conducted by the Mobile Electronics Association, on average, a mid-sized retailer makes approximately 3,500 transactions per year. Adding on a high-margin product or service such as a performance guarantee or accessory would net you an additional thirty-five thousand dollars in high-margin sales.
Finishing the Year
You trimmed your costs, maximized your purchasing and put a plan in place to add on to every sale. With all of this completed, you are on the road to a more profitable year. To make sure you finish the year strong, you can put a dashboard in place to monitor your progress. This can be as simple as a whiteboard, or you can get fancy and create a spreadsheet. Monitor your progress and adjust as needed. This will help you focus on your profit and avoid the procrastination.
