Topic: Margins
Answer: Your problem is a common one within businesses and particularly in the SME community. It is great to see that your sales are increasing but it is margin and ultimately net profit that counts so sales must be profitable. A common element in ‘margin erosion’ is dealing with high volume customers – those who buy a lot but who absolutely hammer you on price. This requires good negotiating skills and a proper evaluation of how much you can concede on price before a transaction tells you ‘walk away’ no matter how big.
The reality is that trading with Amazon is tempting – volumes can be huge but beware ‘eggs in one basket’ and ensure you maintain a spread of customers. It is also essential to know, within your business, where you make money and where you don’t – which customers earn you money and which products and vice versa. This can only be established with a business analytics tool which is remarkably cost effective and pinpoints where your challenges in pricing/ margin and relationships are. Once in possession of the facts in relation to margin drift you can take the appropriate corrective action. Hope this helps but please let us know if we can help further.