Here is a familiar story. A good and profitable business sees a potential threat become reality and turnover falls suddenly. The former comfortable profit becomes a monthly loss.
The first imperative is to stop losing money which means that there must be more gross profit or lower expenses or both. Surprisingly tiny, almost insignificant changes will stop the company losing money. It’s the practice of taking baby steps instead of giant leaps.
For example: A business turns over of R1M per month before the crisis at a gross margin of 40% with operating expenses of R350K per month, leaving a net of R50K per month. To simplify the accounting this article will look at profit per month, as if this was a cash business and ignore tax. Say turnover shrinks by 20% after the disaster strikes, and the profit turns to a loss of R30K per month.
If, instead of making radical changes or retrenching staff, the company implements a careful strategy of tweaking several factors the loss can be eliminated without major change. Continue reading