How many more sales would you need to process, and how many more products would you need to sell, and how much more would it cost you to run the business, if you were to put another $50,000 into your bottom line each year?
Assume your net profit is 5% of total sales, then your answer is; you’d have to generate an extra $1,000,000 in sales to put $50,000 on your bottom line. WOW, that’s a lot of work, and probably a lot of marketing, extra stock holding, extra purchasing, extra work receiving the goods, extra deliveries, and so on.
But, is there an easier way to throw $50,000 on the bottom line?
Maybe you could raise your retail prices…
The pressure on your prices is already huge and comes from direct competition, big box retailers, online shopping, imported goods, economic conditions and price aware customers. So how do you raise your selling price to make more profit in an environment such as this? Surely it’s virtually impossible to do so successfully.
If you break down your business into simple categories – gross profit, operating expenses, inventory and net profit, then the answer becomes clearer…
Raising the selling price is a very limited strategy in the effect on net profits.
Reducing operating expenses is another very limited strategy – after all, how far can you reduce costs before you end up closing the doors.
So for those businesses that carry inventory, here’s a magnificent opportunity to grow net profits, but the question is, how to do it successfully?
Think about what it would mean to your business if you had access to a unique method of analysing and segmenting your stock in such a way that tens of thousands of dollars are put back into your bottom line each year.
Look at the image below and you can see for this client, I have segmented thousands of products (18,812 to be exact) into 9 categories. You might think this is easy done if you choose to rank your products from top to bottom, say, by using profit or sales…. but, what if you used TWO methods at the same time to categorise your stock?
Let’s say you wanted to rank your products by the transaction count on 1 scale and by the ‘stock-on’hand’ value on the other scale… Here’s how that would look, using my method;
Look at the number of products (10,283 dots) in the bottom row of this graph. All of those products have a very high value ($494,182) yet they hardly sell at all. In fact, they contribute just 4% of he total transactions or the business and and deliver just 7% of the total annual profit dollars!
In other words, they are tying up your cash while they hibernate on your shelves.
Hang on, wait a minute! – let’s review that whole bottom line…
These products caused this client to leak $50,000 in profit every year.
That’s a lot of money sitting idle in the business, no matter who you are or what business you’re in- that’s BIG DOLLARS!
Can you imagine if you had this information about your products, how much could you improve things simply by knowing this?
The cost of analysing this data was less than half of 1 month’s losses for this business. The business was losing $50,000 in profit per year just from this single row – Now keep in mind, we have 6 other areas from which we can recover even more profit.
Amazing isn’t it!
What is a review?
A review usually entails your computer data being sent to me, or in many cases the clients provide access for me to extract the data myself. Then the data is analysed, sorted and categorised. I will send, in advance, a request for a list of key data I need to collect for the analysis.
If you are interested to learn how I can help your organisation contact me to arrange a free evaluation. The address and phone number are on the contact page.
For further information or questions, please ask.