top of page

If you keep doing what you’ve always done, you'll get less

Identifying financial risks and implementing strategies to mitigate these risks is key to surviving economic downturns. After all, if you keep doing what you’ve always done, you won’t keep getting what you’ve always got - you’ll get less.


At the moment businesses are hit with a double whammy, being impacted by inflation and increases in supply chain costs, as well as the tightening of consumer spend. While these are out of your control, you can take steps to control the impact this has on your business.


In tough economic times, defining your financial risks and understanding your key financial drivers can be the difference between make or break.


A drop in sales will reduce your profit and cashflow (unless your expenses reduce in line with lost sales), but do you know how much impact it could have?


One reason sales can drop is due to the loss of regular customers. For example, if your sales are £625,000 and your customer retention rate drops from 75% to 65%, that alone would reduce your cash by £22,275 and your profit by £27,500. On top of that, what would happen if your costs also increased? It’s guaranteed in the current inflationary economy.


If your sales stay the same, what will happen to your profit and cashflow as expenses increase?


If your sales stay the same and expenses increase by 5%, your cash would reduce by £10,125 and profit by £12,500. Combine that with the 10% drop in your customer retention rate and it has now cost your company £32,400 in cash and reduced your profit by £40,000 - scary!


You may be shocked at the impact even a slight drop in sales and a rise in expenses can have on profit and cash. You’re an expert in doing what your business does, but not understanding and monitoring the key financial drivers in your business could quickly see your business losing money.


Retaining your existing customers and keeping a close eye on your expenses is essential to maintaining or increasing your cash and profit.


If you would like support with your business finances, we can help you identify areas where you can make small changes to get quick wins. We will focus on results and how to protect your cashflow and profit.






Comments


bottom of page