Why is my business not making money?

We recently ran a business diagnostic program for a client and uncovered an all too common issue with small businesses – you must know your numbers!

In this case the client was not sure why they were not making more money, but thought they just had to sell more. In fact our diagnosis and the actions we put in place proved they had to sell less! Less because on a regular basis the client would have an across the board discount sale and a significant portion of the goods would be sold at a loss!

How can this happen. Well imagine a store with up to 2500 items in stock with a wide variation in margins. When you apply an across the board discount without identifying individual margins you can easily be selling at a loss, and that’s what was happening.

The client had a fabulous stock management system but had not implemented it because “there were so many lines to load – they just did not have time”. The owner was doing it in any spare time available and it had been six months to get it half way.

We employed a data entry operator and in 4 days the program was operational. It immediately made a host of processes more efficient – stock management, ordering, sales invoicing – but the most telling factor was information on margins.

Once it became clear that every discount day was costing serious money we were able to implement some strategies to manage that issue but still offer the clientele great value during the special sales period.

The added cash flows now available enabled the client to implement other great plans which had been hamstrung by budget constraints.

The result is an expanded store, better service, much improved profitability and a very happy owner.