One key difference between big business and small business is how big businesses use their IT systems to drive the business. They measure and measure and if something does not perform, usually, it is gone. There is a relentless pursuit of return on investment. In small business, all to often, underperforming stock is held too long.
This is on my mind today because of work we are doing with a client on turning their business around. We can see that half of the products they have in their stationery department have a stock turn of 1.5 times a year. What big business would tolerate such a return? None. Yet the newsagent we are working with refuses to remove these products because they go to the core of how he sees his business.
He’s wrong. These products are loss making. Loss making products do not define a business. Either this business owner needs to find a way for the products to become viable or he replaces them with other product in this or an allied category which works.
And here is the difference between small and big businesses. The emotional connection often gets in the way of good decisions. It’s a double edged sword, good and bad. I like the emotional of small business but capital demands a return. So, the business decision must come first.
If you client follows our advice he will unlock close to $20,000 to reinvent in new product lines.