Controlling costs and re-evaluating pricing are prudent business management duties. However, with today’s inflation-driven economy it is critical to manage these items effectively.
Cost of Goods
Cost of goods (COGs) and wages are rising so fast that pricing of services and products must be analyzed almost weekly. Many businesses choose to readjust pricing as COGs change and other choose to change the product. For example, to avoid price increases, several restaurant groups have chosen to adjust the product and reduce the quantity of the meals. Such as, providing two pieces of fish instead of three as was done in the past. Likewise, many hotels have eliminated some of the products supplied in guest bathrooms, which was initially attributed to COVID precautions, but now is proving to be a big cost saver.
But analyzing COGs and adjusting pricing may be the only way to protect profits. Pricing is always a bit of “black magic” where you not only have to calculate your costs but consider competitive pricing as well, and at the same time understand your customers wants and needs.
Right now you need to be closely looking at all costs and making sure you are keeping up.
Expenses are another huge pressure on profit. Your business is probably paying more for every item it uses to operate. Given that, are you closely monitoring these costs monthly to see where you can make reductions or changes that eliminate or reduce expenses? Here are some others to consider…
- When was the last time you put your insurance out to bid?
- When was the last time you asked the utility company to come in and do free energy saving audit?
- When was the last time you looked at competitors to your current suppliers?
Your expense statement can be a gold mine of savings and potential profits, are you looking for them?