Profitability Increase of 400% In 12 Months!
When profitability starts to go backwards it can take an outside view to see where improvements can be made. Hear how Graeme introduced effective strategies to turn around the profitability of this business in a short period of time.
Shane and Melody Williams purchased Totally Workwear Port Stephens in 2010, following a decision to move from country NSW. The business was profitable when purchased – operated by a husband and wife team for several years previous.
After two reasonable years in the business, the profitability began to deteriorate. Over the period from FY2010 to FY2015 the profitability of the store decreased by more than 80%, returns to the owners were virtually zero and they were relying on credit cards and equity in their home to survive.
In April 2015, following a ‘business diagnostic’ test which showed more than $120k of potential profit leakage, Graeme started working with Shane and Melody to help improve the profits, growth and value of the business.
A strategic business plan was developed and a series of ‘quick win’ solutions were implemented. The overall strategic plan focused on a five-year period, with the key emphasis on returning the business to profitability in the first 1-2 years. The initial ‘quick wins’ proved very effective, focusing on eliminating unnecessary labour and changing the pricing approach with customers. Almost immediately improvements followed, with profit lifting from $10k at the end of April to $38k by the end of June.
Further profitable growth resulted from the changes to the business with an increased revenue of 30% per month and profit improvement of 10x (or 1000%) from July to the following June. Several monthly sales records were also achieved throughout this period. A major consequence of this return to profitability has been the elimination of more than $100k of debt. The business is now secure and stable, ready for scaling to build a valuable business that will deliver the needs of its owners.
- Falling profitability
- Relying on credit and equity in family home
- High stress
- Benchmark the store sales to sales-person hours
- Establish a pricing policy and reduce discounting to customers and increase gross profit by 10%
- Implement a ‘sales rack’ strategy to attract customers into the store
- Introduce an accurate monthly financial reporting system
- Start utilising the customer database to generate return sales
- Initiate a slow and dead stock reduction policy to free cash and manage cash flow.
- Merchandise the store to eliminate the clutter
- Dedicate resources to build the B2B customer base.
- Reduction in debt to manageable levels
- Improvement in sales per labour hour by more than 200%
- Business profitability increased by 400%
- Family holiday incorporated into annual convention to Cairns
- Family home decluttered through reduction in slow moving or obsolete stock
- Significant reduction in stress as the family bills can now be paid
- Expansion plans have been executed with a new store opening in 2018
If you’d like to speak with Graeme about how to improve the profitability of your business you can contact him here.