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STAFFORD, Australia - AussieJournal -- It's important to be careful with costs in your business over Christmas.
The discounting trend
Consumers expect a bargain and can generally find one. If you choose to discount stock (or the market forces you to), it's essential to know your profit margins to determine what you can afford to give away. A business with a 20% gross profit margin that offers a 15% discount, needs a 300% increase in sales volume simply to maintain the same position. Worst case scenario is that a business trades below its breakeven point and generates losses.
Increased sales from discounting can be great if you know your numbers, have excess or older stock that needs to be moved, generates demand, or drives new customers to you.
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Also think about how you create value; it does not always have to be a direct discount on a product. Packaging might be a better option than a straight discount where you can increase sales of multiple items, even better if you can combine higher demand with lower demand stock. Quantity discounts, value added are also options.
The Christmas cost hangover
Costs tend to go up over Christmas. More staff, lower efficiency, downtime from non-trading days, increased promotional costs, all mean that the cost of doing business increases. It's great to get into the Christmas spirit as long as you don't end up with a New Year hangover. Cost control is important. Many businesses also bring in casual staff. It's essential that you pay staff at the correct rates and meet your Superannuation Guarantee obligations.
If you'd like some advice regarding cost control in your business, book an appointment with us at https://mcfillin.com.au/.
The discounting trend
Consumers expect a bargain and can generally find one. If you choose to discount stock (or the market forces you to), it's essential to know your profit margins to determine what you can afford to give away. A business with a 20% gross profit margin that offers a 15% discount, needs a 300% increase in sales volume simply to maintain the same position. Worst case scenario is that a business trades below its breakeven point and generates losses.
Increased sales from discounting can be great if you know your numbers, have excess or older stock that needs to be moved, generates demand, or drives new customers to you.
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Also think about how you create value; it does not always have to be a direct discount on a product. Packaging might be a better option than a straight discount where you can increase sales of multiple items, even better if you can combine higher demand with lower demand stock. Quantity discounts, value added are also options.
The Christmas cost hangover
Costs tend to go up over Christmas. More staff, lower efficiency, downtime from non-trading days, increased promotional costs, all mean that the cost of doing business increases. It's great to get into the Christmas spirit as long as you don't end up with a New Year hangover. Cost control is important. Many businesses also bring in casual staff. It's essential that you pay staff at the correct rates and meet your Superannuation Guarantee obligations.
If you'd like some advice regarding cost control in your business, book an appointment with us at https://mcfillin.com.au/.
Source: McFillin Accounting
Filed Under: Business
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