Multi-Unit Franchisee Magazine Issue II, 2012 | Page 74

Finance continued from page 70
5. Buy better and smarter. Buy products with your target margin and your
customers’ price points in mind. For example, your target margin is 50 percent,
and your research shows that $200 is the
average selling price point at which your
customers buy. Find products that you can
buy for $100 and that your customers will
think are a good value at that $200 price
point. Also, negotiate discounts for early
payments or bulk purchases from your
vendors. Look for other sources that are
more cost-effective.
One company examined their purchases
and found that managers frequently placed
last-minute orders without paying attention to price, costing the company money.
Once they consistently centralized the
purchasing function and required purchase orders for payments (particularly
with primary vendors), the problem of
extra costs associated with rush orders
was eliminated.
6. Introduce counter-cyclical products. If you have a slow season, think about
introducing counter-cyclical products or
services to your core business to generate incremental profits and cash flow. One
company that sells floor-based heating

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Multi-Unit Franchisee Is s ue II, 2010

systems (with a traditional slow summer
sales season) introduced a de-icing product that could be sold and installed during the summer. They added $80,000 to
their bottom line in the first year of the
new product.
7. Take action. A very wise person said
that hope is not a strategy. Take action
when needed. Don’t let problems linger.
If you made a buying mistake, don’t hold
on to the product. Take the hit and get
it out the door so you can generate cash
to buy or produce products that will sell.
8. Look around you. Find out what
the leaders in your industry are doing. As
long as they are not direct competitors,
most are willing to share ideas. Join a peer
group that shares numbers, not just war
stories. I know many businesses that are
alive and flourishing ev [