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Weathering the Economic Storms

4 min read

So far we have talked about the New Vision, Debt, Budgeting & Cash Flow, and improving profit margins. Building and maintaining these processes can go a long way in helping a business weather any economic hardship. If these processes are followed, when sales go down due to bad economic times a business’ profit percentage will not change.

Now let us expand a little on a few of these concepts to improve their effectiveness.

Budgeting: Last time we talked about budgeting we discussed expenses, now let’s talk a bit about sales.

Improving Profit Margins:

  1. Product cost and sales price calculations: This can be a very extensive and detailed process. When we worked for Delaware North we would detail every cost down to the salt & pepper of a meal. Does it have to be that detailed, no. However, you should have a clear idea of total cost for every item you sell. Then and only then will you have a clear idea on how to price your items and how much profit you are making. If you need help with this we can provide.
  2. Focus on the largest profit makers: by now you should know what your largest profit makers are of your sales items. If you don’t you need to figure this out asap. These items should also be your largest, or most popular, sales items as well. If they are not you need to correct this. These items should be on the forefront of all your ad and menu materials.
  3. Low-profit items or profit wasters: it makes no sense to sell an item that reduces, or eliminates, your profit, selling something for free, or worse paying someone to take something from you. STOP doing this. No one keeps an employee that doesn’t do any work, so why then would you sell something that doesn’t make you money?
  4. Actively work to increase each sale: We have touched on this several times before, and there are numerous ways to increase sales and profit of an item.
    • “Do you want fries with that?” This works! Everyone that takes sales orders, whether on the phone or register or at a desk should be trained to do this. Create a short list of items that can be added to any order that will increase the sales and or profit of the sale.
    • Package deals. As with the above, have a package deal ready, “Do you want the meal deal?”
    • Secret Menu. Do you know most restaurants have a secret menu, and people love it. They feel they are part of only a select group that knows about it. This is a great marketing tool, but it needs to be utilized properly. Don’t put it on your menu or menu boards. Train your employees to divulge this information selectively, the same way you would tell a secret.
  5. Automate/systemize your process. Automating and standardizing your processes is a great way to improve and manage profit. We are going to see more and more of this in the future. You may not have a robot taking orders at the front counter but you can, for very little money, make systematic adjustments to your process to reduce waste, excess costs, and reduce time that all affect profit. Review the process for all your sales items and identify what goes into the process, costs, etc. and detail it out and develop (written) a systematic process that can easily be followed.

Reducing Expenses – Back to expenses. Previously we discussed how to manage and reduce them. Here are a few more ways to do that.

  1. Time Wasters: When evaluating your processes identify any time waster and how to eliminate them.
  2. Build your team.
  1. Debt Reduction: There are those who would argue with us but one of the best ways to weather an economic storm is to reduce debt. “You don’t have to worry about paying something you don’t owe!”
  2. Building an emergency fund
  3. Separate funds and money
    1. Operating account
    2. Tax and payroll accounts
      1. Taxes. You must remember that this is not your money. You are collecting (sales tax) or paying this on behalf of someone else. You should have a separate bank account for these funds so that you can remove them from your operating account as you collect and incur them. This way you will never miss paying them and won’t get into trouble with any tax authority by not paying them.

Sales Tax Solutions and Consulting has over 22 years of experience in the sales tax field, and has helped its clients save millions of dollars in audit assessments. In addition, we’ve helped businesses by recovering millions of dollars in over payed taxes.

We regularly conduct sales tax training, seminars and workshops. These workshops focus on specific types of businesses or individuals within an organization, in order to present the most specific, relevant, and useful content possible. We can also put together a custom training class specifically for your company and industry either at your office or our training location.