10 tips for doing your own ‘end of year’ performance review

Like going to the Doctor for an annual medical - it’s important to take the pulse of your business and make sure everything is working ok.

The tips below are focused on helping to put more ‘money in the tin’ and improving your business profitability; and doesn’t always mean taking radical action to drive topline sales. There are a whole lot of places that you can - and should - go and investigate INSIDE your business to make sure that you aren’t losing out.

1. Do your own ‘range review’ looking at your product performance including:

   • Which ones are growing fastest

   • Which are declining - and need to be either cut or changed to understand why

   • Rank all your SKUs by profit margin - and sales. Look at which are pulling down - or supporting the rest of the range

   • Actively set ‘benchmarks’ for the top 25% / middle / bottom 25% of profit performers

     • Look at both product margin % and also total profit margin $. You don’t want to delete something that is covering overheads just because its absolute % is low. Same is true that a high % margin with no sales isn’t worth saving either - you can’t bank a 100% of $0 sales.

2. WHERE are you selling > Understand different Retailer and sales channel profitability

   • Whats your profit margin for different retail channels? Some channels like Trade Me can have ‘extra’ costs that add up

   • Where do you make the most money - and how are your sales performing (going up or down?)

   • How can you improve profit margins - change trading terms, review payment terms, revise promotional activity

3. Look at your pack size and format vs competitors

   • Are you giving away too much value compared to competitors?

   • Change price perception by adding bigger/ smaller packs

   • Align pack sizes to get better buying efficiencies

   • Look at packaging material, alternate sourcing and how to simplify designs

4. Consider the Packaging material that you use for your products.

   • While the packaging needs to align with your brand values and positioning, its easy and often tempting to ‘over-capitalise’ on this especially in the early stages of your business when print runs are low

   • Is there another type of label paper, finish, colour that you could use?

   • Have you checked alternate suppliers to see if you can get better pricing?

5. Adding too much value - the generosity genie…

   • Look at out your outer packaging - box, wrapper, sticker, printing etc

   • Are you over-packaging? can you simplify? Do customers value this? What alternatives have you looked at?

6. Review your pricings - and make sure they’re at a meaningful price point

   • Rather than the temptation to use a % increase, look at the next ‘logical’ price point for consumers. Lifting from $29.99 by 5% would take you to $31.49 - but a more logical next price point may be $32.99 or even $34.99.

   • Look at the mix of pricing across different pack sizes as well. You may want to adjust differently to encourage consumers to move to a more cost effective product by changing the pricing structure of your range.

   • One way to approach this if you’re in hospitality is to look at your menu and see how you can tweak or update to create extra perceived value at low product cost.

7. Turn your RRP into a ‘price per consumption’ measure - and then compare it against others

   • For example - if you’re selling coffee beans, turn the cost into a ‘per cup’ price and compare to takeaway coffee

   • If your pack size is larger than a competitor - with a higher RRP - this can be a way to highlight a ‘better value’ offer on pack with a simple sticker. Helping consumers understand “500g= 50 serves” is an easy way for them to justify paying a higher price.

8. Look for partners to share costs with

   • This could be packaging (outer courier boxes) or any other generic material - Gift with purchase, courier providers etc

   • There are also group buying organisations that it could be worth looking at for shared resources especially if you’re just starting out and capital constrained

9. Relook at your Ingredients list

   • Are you adding in expensive ingredients that no one actually wants?

   • Have you ‘over-designed’ the formulation for the price you’re charging?

   • Do your customers want the ingredients and specs that you’ve included? This doesn’t mean cutting out all the good stuff, but if your customers aren’t interested in organics but you’ve put some in ‘just because’ then look for other ethical (lower cost) options

   • Can you align any ingredients to give better bulk buying and simplify manufacturing?

10. Review your promotional spend with Retailers.

    • Are you getting bang for your buck with the activity and is it profitable? If its just a straight discount to the Retailer, and consumers aren’t actually buying more, then consider looking at your overall promotional plan and whether you should invest in price or look at changing the type of activity.

    • Retailers will always take more margin, but are also wanting to ensure that they have the ‘right’ products that consumers want to buy. More stockturn is the goal all round so work with them to make sure your promotional spend is working hard.

Take the time to do a regular review - ideally monthly for traffic light margin review, quarterly to dive into issues then every 12 months for a full indepth range review and looking at all your suppliers & costs.

We’ve helped business make huge margin gains just by doing these and a few more indepth reviews. Get digging!!