I may be stating the obvious but there are primarily two key things which will drive business forward and ensure that you deliver value, growth and profits …they are income and costs. Some people may disagree with me and say that surely it’s cash, but income and costs dictate your cash balance and therefore these are the two to focus on.
You’re clearly working hard on the turnover line with the number of shows that you’re attending and the social marketing that you’re focusing on. However, what are you doing about your costs?
On the assumption that you’re controlling your marketing and staff costs (are you?); production and investment in stock seem to me to be the major things to think about. Stating the obvious again, you need to be producing stock at the lowest possible cost.
I don’t know what your turnover and cash flow forecasts look like (do you?) but if you could source a large production run at a low cost per unit and be confident that it’s not going to go out of date then it must be worthwhile?
It will ensure that you don’t have to worry about the production side of things every time you get large orders and you can focus your efforts on generating the income.
Clearly, you need to get the balance right here between over investing in stock that could go out of date but I think it is key to your longer term plans and success.







Comments
"but income and costs dictate your cash balance and therefore these are the two to focus on."
Thanks for clarifying that.
Bob
At no point am I suggesting that profit is more important than cash. Hence, my question as to whether Claire has a cash flow forecast to predict whether she can invest cash in stock and reduce her costs (in the long term). Profit is irrelevant.
If Claire is able to plan ahead and secure a low cost per unit then ultimately it is going to save cash and help the business.
I hope that is now clear to all?
Simon
I would have to disagree with your key message in this piece.
I am guessing that you are referring to Percy's here?
Cash and cashflow do matter more than profit, in the short term.
Profit and of course, cash, are only realised once a sale is made. So, to squander your cash position on stock that you might not need for months is a good way to go out of business!
I think it's far better to tread the middle ground as a young business and focus on cashflow now with an eye on profit as you go forward.
Bob