Do You Have Business Rhythm? (Blockage #5)

When we see great dancers we see multiple things happening in unison, everything happens at just the right time. The dancers sway, move apart, come together and all to a rhythm that may or may not be obvious to everyone else. A few years ago there was an audio fail during an ice skating competition – the skaters continued, and later when their music was synced onto the video they finished on exactly the right note!

Timing is important in business too. We all know that in stock trading that profits are made by “Buying low, selling high”, or in other words timing your purchase and sales times to maximize the difference (and therefore your profit).

Every business has time or timing implications. Having too much stock means it may not be quite so saleable after a while – it might rot or it might just become “Last season’s fashion” but it will drop in value if it hangs around too long. Or maybe there is an optimal amount of stock that you can accept, store and sell in your current premises. Ignoring the implications of timing will just cost you money.

Let’s look at where we are in the journey – you know the concept works, your sales are progressing according to plan, you have the right team in place to manage the business and you have suppliers that deliver what you need, where and when you need it. Now you need to sharpen your pencil a little.

So let’s look at your money – have you negotiated the best deal? Don’t be afraid to go back to your supplier and discuss a new deal – after all guaranteed additional orders may be exactly what they want in order to grow their business, even if that means sharing some of their profit with you.

It means looking at what you charge and adjusting your prices to maximise your return. If you set your prices too high your sales will drop and so will your profit, if you set them too low your sales will increase but your profit will be lower than they perhaps should be.

The optimum spot is where your prices are at the top of what your customers’ believe is good value. They value your offer, your standard service and your additional services more than they value their money. You don’t want to be the low-cost supplier to your clients, you don’t need to be the Rolls Royce in your industry and geography, but you do want to be considered the best value for money (and you do need to be the best at something, and we’ll talk more about that later).

There is another deal that you might want to negotiate (and I have run businesses with exactly this arrangement). Let’s start with the assumption that you are a small business that wants to grow, and that you have a supply arrangement with a company that has a tiered price list. That might be a 5% discount for purchasing 10 or more, 10% for 30 or more and so on.

Ask them if they would rather be paid in 30 or 60 days or be paid “Today”? Obviously most will say that they would like instant payment – then tell them that if they give you the price with the biggest discount that you will pay cash on delivery. You might have to remind them that they provide that discount to the biggest stores and have to wait to get paid, so your deal is better for them than the one they already offer.

The real point is that as your business grows you must ensure that your purchases evolve with you, and provide the best financial bang for your buck. Your profits improve not only by buying at the right price, but by buying the right amount at the right time.

That just means you also need to consider things like Economic Order Quantity and Just In Time Delivery. You can maximise your financial return by ordering the optimal quantity and have it delivered at the optimum time.

That may not sound very sexy, but it will improve your bottom line, and isn’t that what counts?

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