So far, we have just talked of raising enough money to keep the business going. Most businesses also want to make profits for future expansion and to pay dividends to shareholders or bonuses to the proprietors and loyal workers.
In order to make a profit, the company will have to increase its prices by a margin – the profit margin. If your objective is a profit margin on absolute sales of 10%, you can either merely raise the cost of everything by 10% across the board or you can selectively raise prices to create the same effect whilst having some loss-leaders – things that do not have an effective profit margin.
Calculating and maintaining a positive profit margin puts a further strain on management and requires constant monitoring, because the profit margin will almost certainly not remain the same throughout the year.
Some sales periods or quarters are obviously more lucrative than others. Christmas might bring higher sales and higher profits but at a lower profit margin. The January sales might be more to do with clearing the shelves than about normal sales. The summer may be the quarter with the best profit margin. It truly relies on your niche and your approach.
A manager may strive to influence the market’s normal behaviour through promoting and again, this may become heavier in some quarters than in others. Although it is generally agreed that promoting pays, it is really only decent advertising that pays and some campaigns squander money.
Promoting and insurance are additional overheads, although a decent marketing campaign will more than pay for itself and insurance will keep you operating in case of a disaster, if the policy is a good one.
Stock control and rotation are an important part of running a shop and this is usually controlled at the point of sale these days. As an item is sold, the computer reduces the inventory by one unit and warns the manager to reorder when stock reaches a preset minimum.
This is the best and most prevalent system in use today and it gives management a better opportunity of supervising their kingdom, without enormous stock checks on a weekly or monthly basis, as used to occur. It also assists to prevent theft which is also an overhead.
Where there is cash, there are thieves and shops are no exception. Each store loses goods or / and cash to its employees and customers each day or each week. The better the inventory system the easier it is to manage theft and fraud.
One of the latest systems being integrated into the point of sale stock control system is radio frequency identification or RFID. You will have seen RFID tags on items in clothing shops, but these days they can be very small.
The RFID tag will bear a reference number, the description and the price of the item it is attached to and will automatically give this information up to an RFID reader at the point of sale. It works in a comparable fashion to a bar code, but can carry more information and does not need to get hand scanned.
Owen Jones, the writer of this article, writes on many of subjects, but is now involved with large boxes for shipping. If you want to know more go to Where Can I Buy Shipping Boxes?