We’re in the middle of a global pandemic of Covid-19 and a lot of things have obviously happened to a lot of different businesses. One of the big things that we’re seeing is people either having to close their business or pivoting in some way shape or form. And businesses are starting to look at when the can re-open, how they can re-open, and what it’s going to do to their bottom line.
I wanted to take this episode to really focus on how we can think about our businesses. Not just in this current global pandemic. But in general, how we can improve the value and how we can chase the pennies.
This is the perfect time for people to look at their businesses and make adjustments to really increase the value of their business and increase profitability.
Case Study of a Food Business:
This business was not always running a food delivery business. They were a more higher end catering business with other businesses around the food services attached to it. They’ve pivoted and been able to get into the food delivery and have made great partnerships and great contacts and really hustled their way into tight quarters and really pivoted the business in an amazing way in a very tough environment and economy.
“Heavy volume on thin margins can translate into big profits.”
- If you can tweak the margins slightly – every type of penny movement could have huge impact if you are truly doing volume.
- When you take a nickel of cost out of the equation, the impact to the business can become really meaningful.
- Building a sensitivity table around what starts to happen if you can make adjustments to the business on a five cent incremental business change.
Case Study of an Online Company:
This company primarily deals in the supplement industry. They do sell on Amazon but that’s not where their primary business is focused on. But when it came to this business, what was really interesting, was they were trying to figure out how they could drop more money to the bottom line. They started looking at the marketing costs, the promotions they were running, and asking questions about how to reduce that.
A lot of times people are focused on the production costs and that makes a ton of sense. If you can shave some cost off the production costs you’re thinking you’re going to generate some big savings and it will fall to the bottom line and again you’ll get the multiple expansion on that. All true. But at the same time there are other costs when you’re dealing with e-commerce – especially when you’re having things delivered. Depending on the fulfilment of your product and the cost structure of that fulfilment, there are times when running promotions will really benefit you.
“The first item in your box is the most expensive. After that, the incremental cost to ship the item drops tremendously. If you can put multiple things into that same box, you are going to see savings in shipment.”