Our Spring cleaning has drifted more into Fall cleaning with Labor Day coming up soon. As I started to say in the previous article, there is no time like the present to retool and streamline one’s business plan.
Project Managers, CEOS and sole proprietors are all trying to cut costs and increase profit. In sales we are seeing more and more of smaller bags of items like potato chips, candy bars and the like. The prices either stay the same or go up slightly. While I applaud the fact that I can keep my weight down (and I am limiting the amount of junk food I am eating on general health principles-moderation is great for everybody) there are a lot of other people who will feel ripped off.
In the fast food business, some companies, like Carl’s Jr, have taken the opposite approach and are big on loading you up with extra meat and larger hamburger buns. In other companies, like McDonald’s, they are starting to see that they aren’t making the kind of profit margin that they use to because of higher energy and food costs on their dollar menu items. They are kind of stuck though because a lot of Moms hit the drive thru and spend $25 on 25 dollar items for their families instead of ordering the higher priced value meals. McDonald’s isn’t quite sure at this point how they want to raise their prices because that might result in less people going to their restaurant.
It is important to realize that in the United States and other parts of the world right now, their is a financial contraction happening. The best advice that I can give somebody right now is to try something on a small scale and if it works, duplicate it at a larger scale.
I might limit some of the dollar items or start with one of them at the fast food restaurant and see how sales go. This isn’t a novel idea and it has happened before when Coca Cola tried to move over to the “New Coke” formula. People hated it.
People hate change even more when it costs more money. They tend to adjust accordingly though. When gas prices passed over $4 a gallon in Southern California, people started driving less. It was economics in action that the market sweet spot to get people to stop spending money on gas was upwards of $4. Now that prices have dropped somewhat, there is slightly more driving.
The same correlation can hold true in business where you can see if your sales are not going to be affected dramatically by cutting out some loss leaders, give them a shot.
The net result of summer or fall business cleaning is a nice, clean profitable income statement!