Deborah Meaden and Peter Jones give their backing to
YUUbag - and the entrepreneurs behind the company impress
Make It Cheaper managing
director Jonathan Elliott with their meticulous attention to
detail…
Last night's episode of Dragons' Den featured my favourite
moment of series ten so far - and it wasn't the Den-wide hysteria
prompted by Duncan Bannatyne during horror author Andrew Hannon's
mischievous opening pitch.
Sure, that was entertaining stuff, but I watch the show
primarily because I am interested in the nitty gritty of how
businesses make money, which usually involves some insight about
how they plan to get the gap between revenue and profit as small as
possible.
Gill Hayward, pitching a nifty backpack for children called YUUbag with her business partner Kellie Forbes,
provided a classic example.
When asked by Deborah Meaden what was going to change about the
company's business model to improve the revenue versus profit ratio
they had projected, Hayward was able to respond with the same level
of conviction and composure that the "mumpreneurs" had displayed
during their initial presentation. She explained exactly how they
had reduced production costs per unit by nearly £5 - and that the
profit margin on each backpack for their next batch of orders had
increased from £11.90 to £16.60.
This sealed the deal for YUUbag: the figures were mightily
impressive, and it made Hayward and Forbes that much more credible.
They demonstrated a willingness to engage with the fine details
that hold the key to maximising their company's profit.
The Dragons know that keeping control of costs is often crucial
to a company's chances of long-term success. This is why online
retailer Matthew Conridge lost credibility when he explained how
his business had taken increased warehouse space - and the huge
overhead that goes with it - to accommodate what the Dragons
perceived to be an excessive amount of stock.
In contrast, it would have been music to the Dragons' ears when
Hayward explained that she and Forbes had spent a lot of time
"working out what makes their business tick".
It strikes me that this is excellent advice for anyone running a
business, and the practice should extend to your indirect costs. At
Make It Cheaper we preach the value of reducing overheads - and
offer a service that helps businesses do so - because this is an
area where untapped potential for profit often lies.
The amount that a business may save after reviewing their
existing overheads depends on many factors, but let's say it is
£2,000 a year. As far as your accounts are concerned, reducing your
costs is fantastic because the saving goes straight into profit
without you having to sell a thing. Using the example of YUUbag,
which makes a profit of £16.60 per sale, a £2,000 saving is the
equivalent to shifting 120 extra units.
We talk to new and potential customers about getting into the
saving habit and regularly reviewing every cost associated with
their business. This isn't about cutting corners - it's about
maximising the number of pence you make in profit for every pound
of revenue generated. This kind of good practice helps you
understand what makes your business tick and gives
you the best possible chance of success. Perhaps it can lead to
even bigger things. Just look at YUUbag, which now has a £60,000
investment from Peter Jones and Deborah Meaden - and the
opportunity to take their business to another level.
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