Is your company experiencing losses that you never had before?
Your accounting department is telling you, “You need to raise prices.” Your sales department is telling you, “You can’t raise the selling price or you will lose your customers.”
What do you do? Now you have to determine if this is a minor storm that you can weather or is it the beginning of the end and you have to get out before you don’t have a business to sell.
First you have to listen to your accounting department. (Not anyone’s favorite thing to do.) They are just telling you the truth. What do you do with the truth? Don’t bury your head in the sand.
You have to calculate how long you can sustain these losses. Will you be able to raise the selling price to match your increasing expenses? Many have done that during the pandemic and it worked. There is a point where the customer will balk. They will stop buying anything that is not necessary. However, in my career, I haven’t found that to be true. Sales of candy, cigarettes and lottery tickets always soar.
I believe that if you are still faced with this problem, maybe you are just not the right sized company in your business segment? You know that limbo place of the middle child? You’re not big enough to cut expenses to survive. You’re not small enough to not fear competitive pricing.
You have to set a “Cut your Losses Point.” If you can’t raise the selling price, your sales fall below this amoumt, and gross margin falls below this amount, you have to start selling the business.
This is a very sad decision that is being made by many long-time family businesses. That is why it is important to include this in your annual family meeting and annual strategic plan for your business.
Too busy to have your annual strategic planning meeting? Maybe that is a red flag you should not ignore.
Leave a Reply