THE TOP SIX MAKE OR BREAK QUESTIONS FOR WHOLESALE BUSINESSES IN AUSTRALIA

Tell me if this sounds familiar...

Despite the fact that you have achieved great revenues and are typically meeting your monthly sales targets, you are not always seeing the profit and cash flow reflected in your bank account.

Here are every question to remedy the issues that can damage Wholesale businesses in Australia and cause them to unnecessarily bleed profit and cash if not answered.

1. WHICH ARE THE MOST/LEAST PROFITABLE PRODUCTS?

Overall your business may be profitable and that’s great. However, it may be possible to be more profitable if you’re able to see which of your products are most and least profitable. You may have some that are contributing say 20% gross profit, whereas others only contribute 5%. If you’re able to identify which ones are dragging down the profit makers, you’re able to either find a way to make them more profitable or ditch them altogether. This has the impact of making your business more profitable overall.

2. WHICH PRODUCTS COST THE MOST IN OPERATIONAL COSTS THIS MONTH?

As well as knowing which products contributed the most gross profit into the business, it’s also valuable to understand which ones cost the most in terms of operational costs too. If a product provides good gross profit, but takes up a lot of operational costs the value of the gross profit is lost.

• What are my Warehouse costs? 
• What is my labour cost per product range, per line, and per unit? Does the labour activity required warrant the effort of the sale? 
• How are we streamlining the pick pack ship? 
• Is freight eating away a large percentage of the gross profit? And does the freight company lose or damage our product? 
• Is our Warehouse managed closely for leakage – i.e. damage, pilfering and returns processes?

3. WHICH CUSTOMERS, REGIONS OR BRANCHES ARE MOST/ LEAST PROFITABLE TO US?

As with products, some customers, regions or branches can be more profitable than others. You can have great sales with a customer, but they’ve negotiated such a low price that it’s barely profitable to deal with them. Some regions or branches can have higher costs and pricing hasn’t been adjusted to allow for them, which renders them less profitable than others. Many customers are also very high maintenance and hence driving many hidden costs or inefficiencies.

4. WHAT’S OUR BREAK-EVEN SALES POINT?

Your Break-even Sales Point is the level of sales you need to make to achieve neither a profit or a loss i.e. $0 Net Profit result....or the sales required to cover your costs. It’s important to know this as a basis for setting targets to achieve a desired level of profitability. Dissecting your Break-even Sales Point down to a number of product groups helps you to set daily, weekly and monthly sales targets to ensure you cover Overheads. If you don’t know your Break-even Sales Point you’re flying a bit blind, as you don’t know until the end of the month (or often the end of the year) whether you’ve covered Overheads or not. Knowing how to avoid losses is a great way to start making more profit!

5. HAVE WE NEGOTIATED THE BEST TERMS/ PRICING WITH SUPPLIERS TO BOOST PROFIT?

As profit is largely affected by the cost of products, it makes good sense to focus as much attention on your costs (and terms), as you do on making sales. Every dollar of savings on costs goes straight to your bottom line, whereas every dollar of sales may only deliver 5 cents to the bottom line. Makes good sense to focus on costs!

6. HAVE WE ELIMINATED THE CASH ‘PEAKS’ AND ‘TROUGHS’ IN BUSINESS?

Cashflow issues can be a constant headache if you let them. They affect the morale of not just the business owner, but the whole team, who are fielding calls from angry suppliers or hearing about them. The issues that affect cashflow generally are:

1. Revenue
2. Pricing
3. Costs and Overheads
4. Customer payment time
5. Supplier payment time
6. Stock-turn
7. Finance costs and taxes

Ask yourself these questions and take our recommended actions above and you will put your business in a position of dominance.

Rob Lancuba is a partner at CFO on Call, a leadership advisor, problem solver, Growth Specialist and Strategist. He helps businesses boost their profits, wipe out their competition, nail their perfect customer and put their business in a position of dominance! He has been through it before in much bigger organisations and can help you with each step of the way to the success you’ve been dreaming about! Email: robl@cfooncall.com.au or call 0457 555 787

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