Tag Archives: food business

Food For Thought: A Workshop for Food and Drink Businesses

Plans for the Food For Thought workshop are coming together now, and its looking exciting.

I’ve lined up great speakers to join me, and together we will address:
* pinpointing what your customers value,
* which products or customers are worth most to you
* getting noticed by the right customers

All building towards making sure sales growth in 2018 brings profit growth at the same time.

The idea behind the workshop was the number of businesses whom I have met with in the last 5 years who have got themselves into trouble because they put all their effort into getting more sales when what they really wanted was more profit.

If you sell more than one product, to more than one customer I would be prepared to bet that some of the sales are super profitable, but some only just cover their costs.

That’s usually unavoidable, but the key thing is to make sure YOU have made a decision to make the not so profitable sale instead of just being led by what the customer wants.

Selling what the customer wants is not guaranteed to make profit for your business. However, direct profit isn’t the only factor to consider; there’s also issues like keeping customers happy, spreading delivery costs, and establishing a reputation to allow you to develop other products. The challenge was illustrated quite nicely by a business that I met with last month:

The have two product lines which sell well, in large quantities, and are profitable. They have another product (product C) which sells in smaller volumes, is not profitable and causes lots of problems for their factory because they need different processes and different ingredients.

From a finance perspective product C is a disaster and should be discontinued as soon as possible and the factory manager would agree wholeheartedly with this.

However there are other things to consider; the customers who do buy the product love it and the retailers who stock it can’t get enough. Also, competitors who make either one or both of the profitable lines don’t make product C so retailers will not move away from this business while they offer something that no-one else does.

So, from the sales and marketing team’s perspective the business should sell more of this product, even though it is not profitable!

The solution here is to have enough information to know that some sales of product C is good, but more isn’t necessarily better. And a balance between the perspectives of sales, marketing, operations and finance is essential to success.

On the day I will be joined by:

The workshop is at The Cedars Inn in Barnstaple on 27th February from 9.30am to 1.30pm.
Tickets are £30 (inc VAT) until the end of January and can be booked here

Taking stock of the value of stock

One of the most common questions I find myself helping businesses to answer is “Where did all the money go?”

Even in the most profitable businesses it can sometimes feel as though there just isn’t enough cash to pay all the bills.

Usually (* but not always) the culprits are increasing customer debts and increased levels of stock. I posted a blog about debtors previously; basically the key is to know what you’re owed and make sure the customers pay.

Stock can be harder to pin down. It’s easy to see, but it takes time to keep track of exactly what you’ve got and unless you know for sure what’s in stock how can you be sure it’s what you need.

Surely having stock is good?
Stock is an asset of your business – goods held so that you can sell them at a later date.
The problem comes when you have already paid for the stock, or paid for the stock to be made.
Until you sell the stock you can’t get your money back.

So you could think of having stock being like having piles of money locked up in a warehouse.

But I need stock to be able to meet my customers’ orders…
That’s right you do need some stock, and some businesses need a lot of stock. The key thing is to make sure you don’t have too much stock.

There are two parts to this:
1. First the only accurate way to know what you’ve got in stock is to go find it, and count it, and repeat regularly.

This might be time consuming to start with, but usually the more you count stock the easier it gets. You’ll have better awareness of what you have in stock and where it is.

Initially all you really need to know is the quantity of stock that you’re holding, but to see the whole picture you need to know the value too.

Be realistic about this – you need to know how much you paid for the stock, and also how much you can sell it for.

2. Next you need to have a forecast of how much stock you’ll need.
Forecasts don’t predict the future, so there’s no need to get hung up in too much detail. How much stock do you need to cover the time it takes for replacement stock to be ready or delivered?

But it’s cheaper to buy in bulk…
Sometimes suppliers offer cheaper prices for bulk orders, but it’s only a bargain if you actually need all that stock!

A bigger problem can be where suppliers set a minimum quantity per order. Depending on what your forecast says you need it may be worth paying much more to buy just what you need from a different supplier.

So managing stock will help cash flow, but it won’t make me any more profit…

Actually I think it will:
– It’s likely that you will waste less because you know exactly what you’ve got and what you need
– You won’t need as much space for storage, and you won’t need to ensure the stock either.
– You won’t be paying interest on a bank loan (say) to fund all the cash you’ve got invested in the stock.
– There’s less chance that you might be left holding stock that you can’t sell, for any number of reasons – maybe your customer changes to a different supplier.

If my sales increase I’ll need more stock…
That’s true. What often happens is that when sales increase you end up with more cash tied up in debtors and stock, so life gets more difficult.

If 50% of your costs of sales are in raw materials, and you find a new customer who buys £10,000 per month then you will have to find £5,000 extra to cover the cost of additional stock purchases.

This is when you really need a plan – the extra cash flow or “working capital” that you need will have to come from somewhere and life is easier if you plan in advance.

In short, if your business holds stock you need to make sure that you’ve got good information to hand so that you’re looking after your investment.