Many growing clothing businesses are perplexed by ever shrinking profits.
Despite steadily rising sales and good customer retention, profits are inching down towards zero.
In every business costs rise each year, whether its rent, wages or stock purchases, they all become slightly more expensive.
Annual cost increases of just 3% can quickly erode otherwise healthy profits from your business.
It’s often the case that we focus on sustaining sales and achieving growth, but many businesses can receive an unwelcome surprise when they find that these have been achieved, but profits have actually evaporated.
So how can you keep your profits and even grow them? Here are some useful tips to consider:
Increase your prices: No one likes to do it, for fear of a customer revolt. But the bottom line is, if you haven’t raised your prices in the past year, you’ve actually decreased them in real terms. Most customers won’t notice a price increase of 5% and the ones that complain are probably already doing so at the current levels.
Up sell: A successful fashion business is about creating the whole fashion experience. Consider what other complementary products you can package with your existing range, as many accessories have profit margins well above those of traditional clothing items.
Tell the world: Customers only buy items they know you stock and can be quick to pigeon hole you as a seller of just the products they’ve previously purchased. Broaden your customer’s knowledge of your products, by keeping them up-to-date on your entire range and let them know of new products as they arrive.
Fact and figures: It’s a golden rule in business management to have a reliable Watch The Pennies: Whether it be the phone bill, printing or bank charges creeping up, keep an eye on increases in your businesses more basic costs. It’s good to hammer out the best price on major purchases, but a small investment in ongoing bills such as your phone will also save you substantial amounts in the long run.
Debt and equity: Two of the most common reasons that businesses have insufficient financial returns are excesses of both shareholder drawings and loan borrowing costs. The two go hand in hand, as businesses commonly borrow to replace equity that’s been withdrawn by shareholders. Every shareholder deserves the fruits of their investment and labour. But it would be wise to postpone the plans for a new car or bigger house until you’re sure the business can afford it, and any associated interest costs that may now be necessary
Maximising profits is a lot easier than launching new fashion lines or founding a successful fashion company, so take the time to manage profits and you’ll be rewarded with the dividends.