I see alot of business owners going into owning a business and under selling themselves.
We all have different reasons for going into business. You might be looking to be in charge of your own destiny. You have a great idea that youve always wanted to pursue. You lost your job and want to create your own or have a redundancy package that you want to re-invest.
Whatever your reason use these tips below as at the end of day, if youre not making a profit your dreams and aspirations fall by the way side.
Protect Your Margin
Your margin should be enough that it not only covers the direct cost of your product or service materials and labour, but allows you to make a profit to cover overheads and leave a profit/ or income for yourself to grow and develop the company.
There is a market price for every kind of product or service, ie what your customers will pay for your product or service. Stay ahead of the competition, know what they are doing, offer something different to stand yourself apart.
The margin itself
Costing your product or service is a vital project in itself.
Be aware of the percentages your industry can attain. If your in the food industry aim for a minimum of 3 x your costs, manufacturing products maybe lower between 60 and 100% depending on your product or market.
If you are making a product, Costs include
Materials, Labour, Energy
Keep this exercise in mind at regular intervals, at least every six months. Energy and cost of materials do fluctuate, you need to be on top of that.
For the labour cost, time yourself making the product, as you get busier, look at ways of saving time.
Ie a machine might do the job faster than you, you might be able to buy in part of the process.
Manufacturing sites, keep a close eye on this with the use of computerised stock systems, using either FIFO or Standard Costing methods. They see first hand any fluctuations, look into any big fluctuations, up or down.
You can also replicate this using a manual method .
Service Provider
Your service is likely to be mainly labour cost.
Experience and judgement always help when costing up a particular job. But always keep an eye on the actual time it has taken to complete the exercise. Keep timesheets at all times and for everything connected with that client. You will be building up a record in order to raise the sales invoice, plus you will be staying up to date and applying realistic costs when quoting for work.
Cost savings
Save yourself cost of sale by buying direct from the Wholesaler, negotiating the prices. More volume should equal better discounts.
Try and buy local where you can, your carriage costs could be saved.
Saving labour time, by knowing your time elements to the job, using machinery where possible. Time management.
Don’t price yourself too cheap. Remember you need to be selling at a profit.
Offer added value and up sale marketing, to make higher margins.
Split your products up by margin, ie get the selling mix right, volume on lower margin, less of the higher margin.
What constraints do you have
Do you have only limited capacity of manufacturing space, limited number of appointments available put day. Put this into your budget, not just numbers.
If you can improve your margin to a realistic target, you will see the positive result on your bottom line, and hopefully in your pocket too.
Set yourself goals, you can always do better. Keep that mind set, it’s a great planning tool.
This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.
