Black Ops Newsletter - August 23

The war with margin is getting even harder and it’s never been more important to know all your numbers than right now. We are super passionate about teaching our clients how to win by getting margin right at the start. First of all let’s tackle where it can go so wrong, we see this a lot and we have been here too at times.

1. Setting RRP after you have built your product and then slapping a round number margin on top hoping it will be enough.
2. Not providing enough margin for your product to be profitable in all the channels where you want to sell it (including distributors, brokers etc. if required)
3. Not factoring in enough margin to acquire customers profitably - i.e. marketing

Getting this wrong and miscalculating margin causes a snowball effect, first hitting profitability, then the ongoing viability of the business as well as missed opportunities, negotiation challenges, competitive disadvantage and even quality compromises.

The question we are asking ourselves at the moment, and the question you are likely asking yourself too, is how can small brands win when they are getting squeezed on both sides when it comes to margin.

So what do you do?

1. Whatever you do, do something fast. Do not sit and try and ride it out hoping that the margins will return one day, you must pivot straight away.
2. Recut every financial assumption you have into a forecasting model to see how far your goal posts have moved (before the margin squeeze).
3. Build a roadmap back to profitability - it's an honest reflection of where you are really at and builds a path back to where you need to be. Some products may not make it through, some hard cuts will have to be made.
4. Cut your P&L by channel and work out which sales channels are profitable. When you find them, go deeper on what is working and cut channels that are no longer strategic (there is no path to profitability) or are making a loss.

There is a lot of talk about the growing Joyconomy, and we need all that we can get of it!

One of the big buzzwords driving it is 'Dopamine'. We have heard of Dopamine cafe's, Dopamine chocolate and even 'Dopamine dressing'. So if you see people arriving in the office with more pop colours than usual - give them a high five. Because they are happy and it's making you happy too.

"Bloke's Big Blunder: Accidentally Gave Away More Margins Than an Outback Sunset"

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Joel, Jarryd & Nicole - Black Ops