Profit Margins Down?...
For many of us, one of the
pleasures of owning a business is watching it expand and prosper.
However, there are times when business takes a turn for the worse. This
may be due to the industry that you are in, or the economy itself.
Whatever the reason for the downturn, the ability to identify potential
problems and acting before they cause harm to your company is critical.
One of the first items to review
is your profit margin. If profit margins are down, the question to ask
yourself is, "Is there enough cash to cover your overhead
costs?" If the answer is "no", you need to act.
Some of the factors to consider are as follows:
1. Are there any costs that year-in and year-out seem to be getting out
of hand?
Can anything be done to decrease these costs? For instance, increasing an
insurance deductible may lower your premium. Review costs, such as
advertising, to determine if the dollars spent are reaping the anticipated
rewards.
2. Think before you buy in bulk. Buying in bulk may save you
dollars up front,
however, it may tie up cash that is needed.
3. Try to consolidate any debt that you may have. Hopefully, this
will make
managing your debt load easier, and may result in a lower overall interest
rate.
4. Think about letting your employees know the situation at hand.
You do run
the risk of some jumping ship, however, more often than not, you will get an
employee who is supportive and may come up with a money saving idea.
5. Meet with your customers to reinforce your relationship. The
worst that can
happen in a downturn is to lose an important customer.
6. Last, but certainly not least, consult with your financial and
business
advisors to see if they can offer any suggestions.
If you have any questions,
please do not hesitate to contact our office.
