Home' New Zealand Printer Magazine : November-December 2016 Contents 40
Controlling costs while
attempting to increase
profits remains one the
most trying of business
ROBLEMS can arise in your
business when you wish to
maintain or increase profits
while coping with increasing
If your costs go up then, unless you
can increase your sales prices, your
profits will drop. There are therefore
three matters you need to have under
constant rev iew.
They are your costs, your sales
prices, and the market competition.
Let’s look at them individually.
IN many cases you w ill have little
control over your costs.To keep these
under control and limited you need to
check on all components. What can
you do to stop the increases? Check
with your supplier and consider any
I am sure we have all come across
instances where costs have been able
to be reduced but only if you accept a
reduced quality or performance. But
what is the point of doing that if the
result is a grumpy client who will look
elsewhere to replace you?
Taxation also comes in to the
picture. You need to know whether
your costs are capital or revenue
items. If they are capital items,
then your costs will drop as any
depreciation cost will be well below
the capital cost.
I must advise a word of warning
though. This is because if you sell the
item then the difference between the
written down book value and the sale
proceeds will become taxable income.
That could happen at an
inconvenient time. For example, you
may find your business short of cash
and you could have difficulty covering
the ta xed income.
Non-pay ment on time could
generate penalties so you need to
know what you are doing and get the
UNLESS you have the market to
yourself, you w ill have to maintain a
keen awareness of your competitors’
prices. If your price is thought to be
too high, then your clients w ill look
If they can get a better deal then you
will lose the business and you will
have no sale.
This outcome can be overcome if
your ser vice is way ahead of others in
the market. Going the extra mile can
maintain and improve your position
in the market.
For example, it is just 75 years
since the late Harry Martin started
his accounting practice. His policy
was always to exceed expectations
and the result was the start of a
leading accounting practice. Those
who like me, joined the practice in
later years always maintained that
policy which resulted in very satisfied
clients and partners.
To go the extra mile makes for an
excellent policy in business.
It remains an unfortunate fact of
life that if there is no competition in
the market then prices will continue
to increase over time.
However, once there is competition
then the increases stop and prices
drop. You can often achieve this by
dropping the price or by granting
regular rebates depending on the
volume. The rebates are confidential
but the facts will always leak out and
can result in some embarrassment to
The question arises that, if party
A gets a rebate then why do I not get
one? When you don’t understand the
importance of this issue, the outcome
w ill almost always involve the
creation of a grumpy customer who
w ill subsequently look elsewhere for
the better price for their product or
service. The choice is yours whether
you continue as a supplier or whether
you lose your client.
These factors are all important
for you; for your business; and
significantly, for your reputation.
If you depend on your interview
work for your income then it is vital
that you meet market requirements.
You only have to look at the TV
programmes and topics to see how
important those results are. If your
audience level drops then so w ill your
ratings and income.
I have a list and copies of all my
articles done over the years and it is
interesting to see what readers and
listeners are wanting. They think
they know what you will like but their
objective is to keep their funders
happy by keeping up the numbers.
While all this is going on there is the
basic conflict between costs, income,
I think you w ill agree that this
is not an easy lot of needs to always
keep in mind.
Understanding the basics of cost and profit can put your business in the box seat and help your bottom line
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