To get straight to the point: is revenue more important to you than profit?
I often hear this, but I strongly disagree
It's interesting; many people focus on revenue, but you don't! Can you explain?
Being able to steer based on profitability is the foundation of our business. Without visibility on profitability, it feels like I'm driving my car blindfolded. Making a profit means your business is healthy, and a healthy business means you can grow, and growth means you can expand your team. Our biggest challenge for further growth is immediate cash flow. The ambition is to become a dominant brand in the EU for cleaning products within five years. We can only achieve this by steering on profit; otherwise, there simply won't be money to grow.
Steering your company based on profitability is something I hear often, but it remains vague to me. Can you explain concretely how you steer your business based on profitability?
Every day, I look at my profit figures. I look at the figures from the previous day for all sales channels combined and, very importantly, at the profit figures per product. Based on that, I then make decisions.
What exactly do you look at?
First, I check if the figures from the previous day match up, and I don't see any strange numbers in costs and revenue. Then, I analyze the products. Here, I look at sales, inventory levels, and profitability per product. That's what I then steer on.
You say you steer on these figures per product. What exactly do you mean by that?
I shouldn't give away everything, but okay, I enjoy helping others. Here are three examples:
- If I see that sales are high for a product and inventory levels are dropping quickly, I make sure we order new products immediately.
- If I notice that a product sells but has a low profit margin, I make sure we correct this immediately, for example, by raising the price or reducing advertising costs.
- If I see that products are not selling, I adjust the price and/or improve the product's content.
Do you use any tools for this? (Of course, I already knew Atif uses FiveX ;))
FiveX is indispensable for this. With FiveX, I have all these data, such as overall profit, per product, inventory levels, and number of sales, directly accessible. It saves me so much time. Before I used FiveX, I was compiling all this information in Excel myself. That easily takes a few hours a day, and then the figures are not very accurate. With FiveX, for example, I see directly what the profit margin of a product is and whether it sells. Then I decide immediately whether we need to reorder products or whether we need to ensure that it sells more.
I must say I'm impressed by your way of working. Are there any other things you use FiveX for?
The main task is having visibility on profitability and taking follow-up actions based on that.
- Furthermore,I use FiveX's inventory module. I directly input new purchase orders into FiveX and have a good overview of my inventory. When replenishing inventory, I also input the purchase prices so that it's always up-to-date in FiveX.
- In addition, I use FiveX to reduce returns by informing people about the product via automatic emails.
Is there anything you would like to change about FiveX?
I appreciate the integration with Google Ads. It would be great if Facebook and Pinterest advertising costs could also be included. Now, I still have to manually deduct those from the profit in FiveX. It would also be nice if I could manage follow-up actions like reducing the price if products don't sell in FiveX or raising the price at low inventory in FiveX. At the time of this conversation, ProfitMAX was not yet available (read more here).
I find that many people get stuck on the aspect of webshop and marketplace sales. How do you see this?
I get most sales via my webshop, partly because you have many more marketing opportunities for your webshop, like Pinterest, Facebook, Google ads, etc. Marketplaces are also important to be present on because there are many people who only buy on marketplaces, probably for the trust aspect. So, both channels are relevant to me, It actually does strengthen each other.
Last question: does the method work now?
Absolutely. Cool to mention is that our products are in the Albert Heijn Bonus Flyer this year. That's a significant milestone and a sign for me that we're doing the right things.
I think so too! Thanks for your wisdom and openness, Atif. I found it very pleasant and educational.
Glad to help! Have a look here If you are interested in our cleaning products!