Finding the Cash Cow in Your Business

16 Aug Finding the Cash Cow in Your Business

By Ruy Garcia-Zamor and Teresa Sanders

Cash is rolling in.  Got your bills covered with enough left over for some fun money for you too!  You can’t help but think that it is time to expand your business.  But which cash cow do you feed?  What part of your business is really generating the most cash? In other words, can you find your biggest profit center?

Claudette’s hair salon has been a big hit with her customers for over six years.  Not only does her salon offer four great master stylists to choose from, but she also provides high end private label hair care products – which have gone viral on Facebook and Yelp.

Life is good!  Claudette’s clients can’t say enough about how great her services are and love the tasteful décor of the salon.  She often hears suggestions that she should sell her private label hair products on her website.  Great idea! So is the suggestion she create a blowout bar. So is the suggestion that she hire junior stylists that charge less for haircuts.  How to decide?

What Claudette needs to do is find her cash cow!  First she needs to identify her profit centers. By identifying the sources of her income and quantifying that income and the associated costs she will know the profitability of each separate part of her business.  That is how you find your cash cow!

With the help of her accountant, Claudette was able to identify her profit centers:

  • Hair Services – Each master stylist is a separate profit center
    • Tatiana
    • Aubrey
    • Lauren
    • April
  • Private Label Hair Care In-Store Sales

Which, if any, of her clients’ suggestions should she pursue to expand her business?  She knows each suggestion involves start-up costs, equipment, labor costs, and marketing expenses.  More important, by examining her the profit generated by current profit centers Claudette can evaluate which choice will provide the greatest cash flow and profits!

After reviewing her financial statements by profit center, Claudette now knows that the gross profit on her private label in-store sales are fantastic!  With manufacturing and package already in place the start-up costs and complications of offering products on her website are greatly minimized.

While talking to Erica, her web designer, about setting up her online store Erica asks if she wanted to add her trademark registration to the product name.  Whoa!  What is a trademark registration!  Claudette never thought about anyone trying to sell identically named hair care products!  Similar packaging, similar logo, same colors, same bottle shape…oh no!  Not only that but her manufacturer and formula developers know all her secret ingredients!  Blinded by profitability and the excitement of the success of the product line, Claudette never considered she needed legal protection for one of her most valuable business assets.  Fortunately, Erica knows a great Intellectual Property Attorney and Claudette was beginning to understand she needs to protect her brands and how they’re made.

Claudette’s attorney was thrilled she contacted him as he has a great deal of experience working with clients who have created their own products and enjoys sharing his expertise.  He immediately filed for trademark registrations for Claudette’s product names, logos, and tag lines.  This will allow Claudette to prevent people from imitating her products – and even selling identically packaged products.  Then her attorney prepared contracts and processes necessary for Claudette’s product formulas to be protected under state and federal trade secret laws.  This included limiting access to the formulas and putting the appropriate contracts in place with manufacturers, formula developers and distributors.

The grand opening of her online store was a great success!  Claudette’s products sold like wild fire and the reorder rate was through the roof.  Now when Claudette looks at her profit and loss statement by profit center her private label web profits are phenomenal!  With her attorney and accountant team she is now developing her next great idea!!

 

Ruy Garcia-Zamor and Teresa Sanders bring a collaborative team approach to your attorney and accounting needs.  With years of experience they have successfully aided businesses large and small.

If you have any questions regarding business entity formation, employment and subcontractor agreements, trade secret protection, software licensing, branding, trademarks, patent planning or other intellectual property matters, please contact Garcia-Zamor Intellectual Property Law, LLC. Ruy Garcia-Zamor has been helping individuals and businesses with their intellectual property needs for over nineteen years.

If you have any questions regarding accounting, bookkeeping, and business/process consulting services please contact TBooks. Teresa Sanders has been helping individuals and business with their accounting, bookkeeping and business needs for over twenty years.  TBooks client base includes hair salon clients and loves to help them with their profit centers!