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Don’t let rising costs intimidate your profits

by Ron Pelger | March 25, 2011

In the current business world, sales are flat and profits are getting eaten up faster than ever by skyrocketing costs. And just as we manage to get to the top of one hill, we find that there is another hill waiting. Each is beginning to get higher and more burdensome to climb.

Do you find it more difficult these days to earn a buck? Are you overly stressed when trying to meet the company budget? Have weekly sales meetings turned into pressure-cooker events? If so, you are not alone.

World crises, higher oil prices, unsettled weather and increased commodity costs continue to put the squeeze on profits. Most of the crises in the world result in higher business operating costs. Just as the economy starts to show a bit of light at the end of the tunnel, something manages to snuff the light out again.

The first evidence of a problem always turns up in sales. Sluggish salestypically manage to spiral down to the bottom line.

It’s at this very point that many companies begin to panic and make the mistake of placing all efforts on maintaining or cutting expenses rather than boosting sales on the top line. Some try to do both simultaneously.

Where is your company’s break-even point? What sales volume must youattain in order to remain profitable? If you are unable to answer these questions, then the road ahead will become even more difficult.

This past year may not have been so favorable for a number of companies, but others found it to be quite productive and rewarding.

The challenges actually made some companies better by forcing them to concentrate on their top line sales rather than just scrutinizing operational costs and the bottom line.

During hard times, it is best to always try to remain confident and keep in mind that not every single area of the business is lacking. If your company made it this far, pat yourself on the back and keep moving along in the right direction. Anyone can make money during good times. The real experts show their skills i challenging times.

Here are a few tips to stay in the game and energize your business:

Go after sales big time. If you spend most of your time in all other operating areas just trying to save a buck, the high-volume dollars will soon slip away. Always push that top line called sales. Remember, that’s where it all starts and that’s what generates the bottom line.

Continue to advertise. One of the worst things you can do is cut back on advertising. If you normally run a six-page ad flyer and you cut it to four pages, you are sacrificing two pages of sales through the system. The lost sales will trickle down to the bottom line and eat away at profit. Sure you saved a few ad dollars, but you still lost sales volume. Besides, your competition probably captured the sales you just surrendered. Don’t cut advertising.

Maintain quality. Quality is a big issue and has built a sophisticated reputation in the produce industry making it a prime factor in doing business. Now customers always want the highest-quality products, but they also want the lowest prices. If you lower your quality standard due to cost savings in order to retain the same pricing, you actually raised your prices. You could only cut down package sizes just so much. Customers are wiser than ever before.

Stop lowering prices. Sales slumps often spark panic promoting. The more you lower prices, the more you chip away at profits. Everyone knows food prices are on the rise. If you could hold the line on pricing and drive sales, profit could prevail. But if you give away the house, you could go broke.

Know your market. Who is your competition? What are they doing? How are they doing it? You have to know the answers. Get out there in the trenches and find out how you can do it better.

Stay connected. Did you lose any customers? Have you given up on them? Why? Keep in constant contact with old as well as new customers. Make your company stick in their minds. Do a lot of networking by attending conferences, conventions and food shows. Keep communicating and win over customers. If you don’t, someone else will.

Always remember that fast turnover is the main objective in developing profit. Keep driving that top line — sales. Strive to sell massive amounts of product on a consistent basis without lowering prices. To put it more directly, don’t let higher costs push you around.


Ron Pelger is the owner of RONPROCON, a consulting firm for the produce industry, and a member of the FreshXperts consortium of produce professionals. He can be reached by phone at 775/853-7056, by e-mail at , or check his web site at