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Sales are steady but how do we PROFIT?

 
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stickme

posts: 13

Jun 16, 2008 8:36 PM ET    Quote
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Hello SUN`ers! 
 
I wanted to ask you all a question in regards to when you sell a `made` product and resell it.  We have our products made here in the US, with no immediate plans to go `international` due to cost and logistic constraints. 
 
But here`s the thing, we have unique niche products that are selling steadily from our online boutique, but my question is how do we go from not profiting to making a profit.  Now when I say `profit` I mean we recoup the manufacturing costs, but we are not in the positive with our credit cards we used to get started.  I mean we are making our monthly payments just fine, but when and how do you get to that point where you`re surpassing your costs enough to profit? 
I don`t want to really raise prices as I think we`re in a nice groove in terms of price points.  Will it always be this way until we secure large company orders???
 
Any advice, light at the end of the tunnel, or feedback is most helpful!
 
~Rickina


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{Rickina}
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:::::::
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DaleKing

posts: 1061

Jun 17, 2008 11:13 AM ET    Quote
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Rickina, there is no easy answer to your question. However, the obvious answer would be to increase sales. Also, if I were in your shoes I would look to add related-products that have low-cost and high profit margins.
 
So how can you increase sales? Analyze your advertising, and double-down on what`s bringing in the most sales. And cut your losses on losing advertisng campaigns. It`s all in the analysis.
 
Dale King 
 
 
DaleKing6/17/2008 11:16 AM


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KevDev

posts: 96

Jun 17, 2008 1:32 PM ET    Quote
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Rickina:

As you know,

Profit = Revenue - expenses & costs

Anything you can do to increase revenue OR decrease expenses and costs should lead to increased profits. Can you raise your prices? Decrease overhead or other expenses?

Good luck!



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CraigL

posts: 9051

Jun 19, 2008 1:26 AM ET    Quote
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Raise your prices.

-------------------------

Craig Landes
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Defining the undefinable. "There are 10 kinds of people in the world---those who understand binary numbers and those who don`t." - Unknown

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houseofjerkyjanie

posts: 1150

Jun 19, 2008 1:28 AM ET    Quote
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You`re advice is priceless, Craig



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CraigL

posts: 9051

Jun 19, 2008 1:31 AM ET    Quote
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(that`s `cause it`s free....)
CraigL2008-6-19 14:36:29


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Craig Landes
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Defining the undefinable. "There are 10 kinds of people in the world---those who understand binary numbers and those who don`t." - Unknown

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vwebworld

posts: 1177

Jun 19, 2008 12:33 PM ET    Quote
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Increasing sales may or may not increase profit... it will if your selling your product for more than the cost of the product (gross margin) and your other costs do not increase at the same rate as the increase in sales.
 
The bottom line - you need to first see that your gross profit (the sales revenue less the cost of the product) is positive. This is for each individually item you sell.
 
Second - look at all your costs and determine which are fixed costs (remain the same no matter how much or little you sell) and which are variable costs (those that change as sales change).
 
Third - determine your break even point, the level of revenue that equals your costs.
 
To increase profit you need to do better than your break even point. This will be a sales level above that which covers your fixed and variable costs.
 
How to do this - are there costs that you can decrease? You mentioned CC debt, typically this is very expensive (high interest rate). If you refinance that at a lower rate, that can reduce your costs.
 
~Roland


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CraigL

posts: 9051

Jun 19, 2008 2:38 PM ET    Quote
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Another thing to look at is the original business plan. How did you plan for profit when you set up the company? Were your sales expectations that far out of line? If so, you may need to re-examine the viability of the company.

-------------------------

Craig Landes
---
Defining the undefinable. "There are 10 kinds of people in the world---those who understand binary numbers and those who don`t." - Unknown

International Society of Curmudgeons
Benji145

posts: 7

Jun 23, 2008 10:45 PM ET    Quote
Points: 0   Vote
It is a complex question. You can try adjusting the price, but it will affect the sale amount. You must maximaze the revenue. Maybe it is a hard work for your company, you can look the consultant company for help.
robertj

posts: 1181

Jun 24, 2008 12:44 PM ET    Quote
Points: 0   Vote
Hello SUN`ers! 
 
But here`s the thing, we have unique niche products that are selling steadily from our online boutique, but my question is how do we go from not profiting to making a profit.  Now when I say `profit` I mean we recoup the manufacturing costs, but we are not in the positive with our credit cards we used to get started.  I mean we are making our monthly payments just fine, but when and how do you get to that point where you`re surpassing your costs enough to profit? 
I don`t want to really raise prices as I think we`re in a nice groove in terms of price points.  Will it always be this way until we secure large company orders???
 
Any advice, light at the end of the tunnel, or feedback is most helpful!
 
~Rickina

Rickina,

Although it`s tempting to toss out possible solutions - we really a clear identification of the situation first.

You say the company is not making a profit - but is it profit or cash flow that is the issue? If you are not profitable, your income statement should offer some good clues as to the issue:

  1. Insufficient gross margin percentage per sale
  2. Expenses
  3. Low revenue volume.

If you know which of the three above areas are the cause - then you can begin to determine the actions to take.

 



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