Printwear

July '18

For the Business of Apparel Decorating

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12 || P R I N T W E A R J U LY 2 0 1 8 Vince DiCecco is a dynamic and sought-after seminar speaker and author with a unique perspective on busi- ness development and management subjects, primarily in the decorated and promotional apparel industries. With over 20 years of experience in sales, marketing, and training, he is presently an independent consultant to various apparel decorating businesses looking to im- prove profitability and sharpen their competitive edge. Visit his new website at www.ypbt.com, and send email to vince@ypbt.com. YOUR PERSONAL BUSINESS TRAINER B Y V I N C E D I C E C C O B usiness growth and expansion require careful research and planning. You cannot simply wake up one day and decide to move the enterprise out of your current digs and into a new, more spacious leased commercial space, or take on a new product line outright. The decision to extend the scope of your business must be a result of thoughtful analysis, including the financial, logistical, and even your emotional readiness to shake things up. TIMING IS EVERYTHING In general, businesses should make a move only when there are growth opportunities that can benefit your business and give you an immediate—typically, less than six months—return on investment. Think of it as planting a tree that already bears low-hanging fruit. There may be an untapped market niche on which you want to capitalize; or, perhaps, a new location that will deliver significantly greater traffic at your grand opening. Whatever change you initi- ate, have a well-developed plan with plenty of contingencies should events not pan out as expected. And, certainly, understand that expanding operations does not al- ways guarantee success. You may be doing more volume by moving to a larger or second location, and working harder. But, with the additional overhead, you may not make any more money. You may be asking, "Why then should I even undertake the chal- lenge?" The only point being made here is there are no guarantees, and a lackluster result is certain if you don't know how much more you will need to sell to cover your investment. Accordingly, allow me to introduce the break-even formula: Fixed expenses (overhead) Break-even volume = _______________________________________________________________ Gross-margin percentage – Variable-expense percentage If you refer to the company's most recent profit-and-loss statement (aka Consolidated Income Statement), you should be able to locate or calculate your gross margin percentage. It's near the top of the statement on the line labeled Gross Profit. If, on your P&L statement, there isn't a separate column with the heading "Percent of Sales," you may have to take that dollar amount and divide it by the top line, total income, or gross sales revenue. For example, if the company's gross sales revenues are $1,200,000 and the cost of goods sold is $500,000, then the gross profit is $700,000 and the gross margin percentage is 58.3 per- cent or 0.583 ($700,000/$1,200,000). Look down the rest of the P&L statement and classify each line item as either fixed ex- penses or variable expenses. The easiest way to do this is to go down the statement and ask yourself, "Would the company be re- quired to pay for this regardless of how many things are sold?" If the answer is "yes," then that total gets added to the fixed expenses. If the answer is "no," that amount is consid- ered a variable expense. For instance, if the company does not have an advertising firm on retainer or fixed con- tract, and it decides to promote and market itself on an "as needed" basis, then the total spent on advertising should be classified as variable expense. Conversely, the line item labeled Payroll Expenses usually becomes Thinking of expanding your business? A Time to Grow, A Time to Move

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