Irish Independent - Business Week - - IN PERSON -

COULD you give me a few words of wis­dom on im­prov­ing the prof­itabil­ity of a man­u­fac­tur­ing busi­ness?

SALES are van­ity, profit is san­ity. It is good to see that you are fo­cused on the bot­tom line. In most man­u­fac­tur­ing busi­nesses wages tends to be the big­gest cost.

It is not so much about slash­ing your pay­roll cost, but about be­ing more ef­fi­cient and able to pro­duce more prod­uct with the same labour lev­els.

En­ter­prise Ire­land has great sup­ports for lean man­u­fac­tur­ing, and if you have not em­braced these al­ready I would sug­gest you in­ves­ti­gate the topic and if pos­si­ble get a lean ex­pert into your busi­ness.

Many man­u­fac­tur­ers that I have met have missed the op­por­tu­nity when en­coun­ter­ing good busi­ness growth to rene­go­ti­ate prices with their sup­pli­ers.

I am sure your busi­ness is two or three times big­ger since you started. Have you rene­go­ti­ated prices of items you are buy­ing in?

Very few of your sup­pli­ers are go­ing to vol­un­teer dis­counts and there­fore ten­der­ing your key costs would be a vi­tal part of im­prov­ing prof­itabil­ity.

Sur­pris­ingly, grow­ing your sales can very of­ten be a so­lu­tion to in­creas­ing prof­itabil­ity. Some busi­nesses make the er­ror of slash­ing all costs, which in turn makes it dif­fi­cult for the busi­ness to grow. It is about creat­ing a bal­ance.

If you can main­tain the busi­ness costs at cur­rent lev­els, and drive more sales through at the same time, that will au­to­mat­i­cally re­sult in the busi­ness be­ing more prof­itable.

Do keep that in the mix of ac­tions you take, oth­er­wise you run the risk of sti­fling busi­ness growth.


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