What Is The Difference Between Margin And Markup In Finance?
When talking about finance and accounting, there are a variety of terms to keep in mind. One of those is the difference between margin and
A successful business often tends to add costs indiscriminately. Business owners get blinded by the fact that their company is rapidly growing its revenues while maintaining a healthy bottom line. This lax attitude percolates down to employees who start incurring expenditure that does not provide any real benefit to the organization.
In many instances, company staff do not even provide customers with a basic level of service. They are so caught up with their daily activities and with managing increasing revenues that customer complaints and feedback get ignored.
When revenues and profits are rising, businesses can absorb excessive costs easily. But when growth slows, every additional item of expenditure becomes important.
What can a company do to ensure that it continues to thrive when there is a business downturn?
When the business cycle turns, the immediate reaction is to cut costs across the board. But when you do this, make sure that your most important customers do not get affected.
In an article titled Could Your Business Survive An Economic Downturn in 2016? Four Ways To Prepare Yourself, Michael Evans advises businesses to identify and maintain their strengths and their best customers.
When a cost-cutting exercise is in progress, care should be taken to list key clients and to shift resources to ensure that they are given every possible facility. When the market is contracting, the last thing you want is to lose your high-volume customers.
When you are making profits and your cash flow is strong, you do not need to raise funds from external sources. But this is the best time to approach banks and other lenders to establish a line of credit.
Writing in Inc.com, Janine Popick, says that company owners should seek funding when business operations are doing well as this is the time that lenders are more likely to grant an approval. If you wait till you are in dire need of money, it will either not be available or will come at a very high price.
In Prepare For a Massive Recession, Grant Cardone points out that companies should spend “only to increase income.”
Unfortunately, many business owners are not aware of the often wasteful expenditure that builds up in their firms over a period of time. A thorough exercise to prune all unnecessary costs can yield substantial results.
It is impossible to predict when the next recession will take place. But your company could face challenges even if the overall economy is flourishing. Your industry may experience a slowdown or some of your major customers may stop from buying from you.
Every business owner should have a plan of action that can be put into operation when market conditions deteriorate and sales start decreasing. Even if you never have to use this plan, having it ready will give you the confidence that you are prepared to meet a downturn, should one arise.
Ravinder Kapur is a business operations writer at Aepiphanni, a small business operations and strategy consultancy that exists to help small business owners CREATE | DESIGN | BUILD extraordinary businesses. He is a commerce graduate and a fellow member of the Institute of Chartered Accountants of India. He has been affiliated with various interests in the financial services industry for more than 30 years. His finance expertise includes the commercial vehicle, automotive, and construction equipment sectors, as well as corporate finance. His experience in these disciplines has included business development, credit analysis, risk management and financial recovery. In addition, he worked extensively in corporate finance recoveries and was involved in several large value arbitration cases.
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