Most businesses take time to become established and you do not expect profits in the first few months. We are ahead of the game by a good 3-6 months which is when I thought we would see our first profits.
Over the last few days I have been going over the profitability of the business seeing where the spend is and if anything can be done to reduce this even more. The business has only been operational for 2 full months ad we are already in profit.
The first month was touch and go which saw us basically break even mainly down to the amount of overtime required to sort some out mistakes the buyers had made with regard to pack sizes. Last month we came in under budget by just over 10% which also included having 3 extra casual workers for 16 days of that time.
There are some areas which could be trimmed, but you have to also weigh in the consequences because if you are running a tight ship then you are at risk if something goes wrong. The obvious one is the fork lift issue which should save another 2% by either renting elsewhere or buying our own. This I need to follow up on tomorrow because a neighboring business has one for sale or will be for sale once they have finished carrying out the repairs. They have 2 forklifts and even renting the bigger one for less than we are paying for our rental would still be considered a win.
The thought that constantly goes through my mind is the figures we are working with is more than a 60% saving of what the previous business was doing and had been doing for years. What a waste of money and it is no wonder they were in financial difficulty. Dangerous if you have no sense or understanding of the business you are supposedly running.
What is clear is they had no idea what they were doing and no knowledge of what things cost. The accountant who was running the show favored a certain logistics company for deliveries because he was friends of the owner. Last week he pulled the plug on that deal saying use whoever you want to because he can see how expensive they are. When he stepped in and changed the couriers a good 6 years ago I mentioned to them at the time it was not a good deal and that they need to fight this decision.
We have been slowly over the last few months using this firm less and less and have 2 others to step in who will be cheaper. It was not his decision this time to say we can use someone else anyway as he has no say in how we operate and they were in the process of being replaced. They would count for less than 20% of our entire delivery portfolio having been at around 70% in February.
The 60% is still crazy as a savings because if another 10% could be found then you could literally run 2 businesses for what they were spending before with the same result. Not forgetting another 2 businesses have yet to start which will make those businesses less stressful knowing we are already under budget and in profit. This is big because we know how profitable these businesses are and why coming in under budget for the warehouse business was so important.
What is left to do now is to separate the 3 businesses so they can share the expenses and pay their way once up and running reducing the running costs of the warehouse business increasing those profit margins even more. They have to be charged for the space they are using and to treat them as separate identities,
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That sounds like good news !
With you in charge of the numbers, I am confident profit will be a regular thing. Big congratulations as making profit these days is an art!