Time and time again we see how businesses tend to look over the small things because there is so much else going on in the business around them. Wayne Patten has experienced this exact situation in many of the Hotels he deals with. To help you get your business in order, follow Wayne's 7 Simple Steps to Boost Your Profit Margin.
The following 7 Simple Steps to Boost Your Profit Margin is based on the Hotel Industry.
1) Spend the time and work out how your inventory system works. Many of us hate computer systems, however this is where you win or lose in the sale of alcohol. If you can't get assistance or you are struggling with how it works, speak to your business advisors or PJT. We also have hoteliers on our books that would be happy to share their experience with certain inventory systems and ways of improving the margins. Just ask us!
2) Spend time with your supplier reps and work out what sells and what doesn't sell. You should be able to draw down from your inventory system a sales analysis report which details all of your alcohol lines. Spend time going through through this with the suppliers and let them know what sells and what does not. It is the suppliers job to put in place discount structures and promotions to grow your business. If they don't want to help, look elsewhere for a buying group as it should be in their interest to make you grow.
3) Check how your inventory system is setup, does it automatically add a Gross Profit percentage onto the cost? and does this cost include freight? (some suppliers include others don't).
4) If you are in a buying group, make sure your prices are right on the day of special and off on the morning after specials close. If it is a good selling line, ensure you buy on the final day of special and are selling this product when pricing of product goes off special, thus you will be making additional gross profit.
5) Ensure that you or your manager has a good eye for detail on what is selling and what is not. Don't buy products just because they are on special if it does not cater for your clientele. The number of hotels who are purchasing stock when the previous stock items took 12 months to sell is quite amazing. You really need to keep an eye on stock usage with correct monitoring procedures.
6) If you have slow moving stock, just sell stock and get it out of the store as it is using up valuable space on the shelves and also costing you interest on overdraft. Stock more of your faster selling products.
7) Ensure that all your staff have a good understanding of products so that they can up-sell. Imagine if you went into a detach bottleshop as a customer and you could ask the salesperson what to drink with the meal you are cooking. The chance of up-selling or selling wine with higher gross profit margin is amazing. The most profitable drive-thru I have seen was being run by a hotelier who knew what wine or alcoholic beverage went with what meal. Twelve months after selling the Hotel the drive-thru is running at less than 50% of the turnover as there is no longer any customer service or knowledge by the staff. Use the sales reps from the breweries/ALM and ask them to get people to help train staff.
As you can see the above is nothing out of the ordinary or high tech science, however very few people find the time to look at this area. Remember if your turnover is $1,000,000, 1% increase in margin is $10,000. This will pay for the extra time you need to spend on the inventory system.
If you have any queries about any of the above or if you need advice on how to grow your business please don't hesitate to call our office on 07 5413 9300. If you are a Hotelier and would like more information on the above email Wayne Patten, Director wayne@pjtaccountants.com.au