Should you drop a segment of business for something more profitable?
I get this question quite often. Let me ask a question in return: “Do you know for sure that the segment (product, service, division) is profitable or not?” Even if you know for sure; could it be that having a loser is actually supplying revenue to some other part of your business?
Obviously there are some occasions where the market has changed or perhaps your company has just made a poor decision. It such cases, it’s definitely good to cut your losses and move on. But, before you make haste, you should know for sure.
We work with so many businesses that do not really know because they fail to utilize a simple tracking tool, within their QuickBooks accounting software, called Classes. If you use some other traditional software, it should certainly have a similar capability - if not, we can show you how to engage a solution. If you’re not using any software, whether you have multiple disciplines or not, may we politely suggest that you do not know for sure. There is simply too much information to analyze without having a tool to help you.
Most of the companies we work with are surprised to find that the profitability is not coming from exactly where they thought. Seeing this information compiled into a useful and understandable form, as opposed to just a bunch of numbers, is generally the catalyst for smarter decisions and increased profits.
We’ve all heard the phrase, “Don’t ask, don’t tell”. We say, “Ask… what you find might surprise you”! So, do it - ask us today. It doesn’t cost anything to inquire.
Leave a Reply