| This is a continuation of part 1 article about | | | | One of the assumption made was the selling price |
| Business Performance Assessment Part 1. In my | | | | was too low but based on the data collected, the |
| previous article I disclosed that a Small and | | | | selling price of their product was reasonable and |
| Medium Enterprise conducted a self assessment | | | | competitive with the market trend. On top of |
| to their own business performance and wonder | | | | that the margin for exported product was 15% |
| why the profit less than 1% compared to the | | | | which was considered high for the economy now. |
| industry benchmark of 10% | | | | Assuming that is so, then the cost of sales could |
| To recap some pertinent data from the previous | | | | be too high such that there is not enough for the |
| article, it indicated that the sales volume is high | | | | profit. |
| enough to occupied the capacity of the assembly | | | | More data collection was done and was |
| plant. Therefore it is not a matter of sales volume | | | | discovered that the overhead for the company is |
| shortage. From the data, it is not about | | | | around as high as the profit margin. This data help |
| productivity that causing low profit. For export | | | | to make one conclusion that is the overhead of |
| market, it can fetch a mark up margin of 15%. | | | | the company is too high for the selling price it can |
| With this margin, it is obvious that the company | | | | demand from the customer. |
| was able to sell their product at a reasonable | | | | In conclusion, the option to improve the margin is |
| price. | | | | either increase the selling price or reduce the |
| Here is the financial formula for PROFIT = Selling | | | | overheads. Get tips to analyse the business |
| Price - Cost | | | | performance with a Marketing Plan. |