Tales from the margins - marginal tale number 2

Once upon a time, there was a skilful person who set up a manufacturing business, supplying goods to the construction industry.

The business had a basic product on which the margins were quite low and there were lots of competitors.  It also had a specialist product, for which there were far fewer competitors and because the company was adding more value with its processes, the profit margins were high.

Whilst the construction industry was doing well, so was the business, and demand for its specialist product was high.

However, when the recession struck, demand for the high-value products fell away sharply, leaving only the low margin product.  The company was able to win more of this type of work, which it had to do to keep going, but there was over-supply in the industry and little profit to be made.

The business owner is an entrepreneurial chap and thought long and hard about what to do.  He identified some new, higher margin, products that he could easily supply; and he also extended the geographic range of distribution for his existing products.

Whilst times remain difficult, the actions taken are putting the business in good shape to survive the recession and come out strong.

Revell Ward tips:

•    be proactive – when times are hard, don’t feel sorry for yourself, be imaginative and work out a plan.

•    be adaptable to survive – if sales of one product are suffering, try to sell more of something else and look for new products to bring to the market.

•    watch your cash – companies go bust because they run out of money.  Short term losses can be survived, provided you manage your stock levels and payments from your customers, so that you have enough money to pay your bills and keep your bank happy.

For more information call 01484 538351 or email John at john.wilson@revellward.co.uk.