Are you losing money due to inefficient systems and shrinking margins? If so, I think you’ll benefit from today’s Virtual Strategy Session, where you’ll learn to avoid these kinds of obstacles.
First, a quick review. Last time we talked about closing your cash gap. Your assignment was to work on establishing shorter terms with your customers and longer terms with your suppliers, while encouraging your customers to pay you faster through systematized collections procedures.
Today, I would like to introduce you to another concept that will make a huge impact on the profitability of your business (without spending an extra dime):
INCREASE YOUR MARGINS.
- Take a Premium Price Position. Many businesses are afraid to lose customers, so they discount their products and services. But did you know that this is one of the least effective ways to position your company? There are limits, of course, but most businesses can easily afford to increase their prices for dramatic improvements to the bottom line. Click this link to view a fascinating chart, from the Australian Business Toolkit, that shows the kind of impact even small price increases can have on your overall profitability (yes, even if you lose a handful of customers in the process).
2. Negotiate Lower Prices from Manufacturers and Dealers. Negotiating lower product costs from manufacturers and dealers is often as easy as asking. You will be amazed at the kind of results you can get using this simple question: “Is that the best you can do?”
3. Implement a “Lean Manufacturing” Plan. Lean manufacturing is not about cutting corners. It’s about improving efficiency and, therefore, quality! You do it by eliminating waste in the form of overproduction, excessive defects, too much movement (both on the production floor and in transportation), and unnecessary processing. This is a complex but vitally important component of all successful businesses. So, be sure to consider how you can make adjustments in your company. (And no, this is not just for manufacturers of tangible products. You can apply these principles for dramatic improvements in just about any industry!)
4. Stop Stocking Inventory That Does Not Move. One of the fastest ways to lose money is by spending it on inventory that doesn’t sell! My rule of thumb is to keep inventory for no more than 45-60 days in advance.
5. Watch Inventory Shrinkage. Unfortunately, employees are not always ethical (even, in some cases, those who have been with you the longest), so keep a close eye on your inventory. Have systems and policies in place to prevent employee theft.
Identify at least three areas of improvement in terms of shrinking margins. Remember that one of the simplest and fastest ways to address this issue is to increase your prices, so I strongly recommend you consider this strategy first and foremost.
Then, because some of these strategies will probably require a bit more assistance to implement properly, get in touch with me. You can call me direct at 506 872 2900, send me an email, or CLICK HERE to book a FREE 30-minute appointment to discuss anything you’d like more information about.
In the next Virtual Strategy Session, I’ll address what you can do to reduce your overhead and fixed costs.