Industry Focus

INDUSTRY TREND "It's no good slashing fixed costs such as staff or cutting corners on production. That simply diminishes value as opposed to saving costs ... and this tends to reduce sales in the mid-term." Scott Flaxman, Davidson Institute's Senior Business Coach, says franchisees must work out the essential costs to keep the business profitable and the product value at the desired level. "It's no good slashing fixed costs such as staff or cutting corners on production. That simply diminishes value as opposed to saving costs … and this tends to reduce the volume of sales in the mid-term." Instead, businesses must focus on increasing efficiencies and limiting waste. Effective measurement of the flow of stock helps to understand any business' seasonality, indicating which products sell best and when. Stock and staffing levels can then be adjusted accordingly, as too much stock or too many staff is expensive and wasteful. There are plenty of ways to manage both to ensure efficiencies. To test whether your franchise is managing efficiently, Muller and Flaxman recommend that the top three actions you should take are: a break-even analysis; determine the daily cash value of your stock on hand; and identify quick productivity savings. For help with these, or any other cost management outcome, visit www.davidsoninstitute.edu.au for further information. Tips from the Davidson Institute Stock management tips: • Understand and plan for seasonality. • Keep 'stock on hand' to a minimum. • Maintain healthy relationships with suppliers and review regularly. • Look out for the hidden costs of storage, waste and damage when holding too much stock. People management tips: • Understand and plan for customer traffic flows. • Have clear job descriptions and performance criteria. • Measure productivity. • Communicate regularly, and recognise and reward good performance. • Recruit well—it can be an expensive process if you get it wrong. Franchising • Issue 1 11

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