How we helped a Cannabis Dispensary to increase their profit margin by 18%
One of the goals of CFO Services is to make business owners aware of their opportunities for growth that exist in their existing financial strategy. In this case study, we demonstrate how our financial reporting plus excellent business advisory will guide your business development.
CFO Services
CFO Advisory
Platforms
Quickbooks and Flowhub
Result 1
Result 2
Project Overview
Just like any other client that we work with, we started this project by doing an initial assessment of the dispensary. Without initial an assessment it can be easy to overlook key sore points that can affect most businesses: low profit margins due to high expenses and low sales, over payment of vendors, and over-payment of taxes. All of which can lead to lost opportunities to bank profits. During the initial assessment we identified that there were two key activities that we needed to execute with precision:
- Streamlining the bookkeeping process to create more timely and accurate financial statements.
- Identify weak points in the current financial strategy and reverse their effects on the business.
Execution
To achieve the results of higher of lower expenses and higher profit margins we had to do a deep dive of the company's financial condition. We started first by reviewing the dispensary's highest balance sheet accounts: Accounts Payable. In order to have accurate and timely information accessible on a weekly basis, we improved the system to reconcile invoices, vendors, and and payments. The effect was better transparency over the businesses cash flow forecast.
Second we reviewed income statement accounts and determined there was a weakness in sales. Our month over month analysis determined that the sales incentives currently in use were having an increasingly negative impact on sale. We knew from previous experience that changing sales incentives may not immediately result in an increase in sales. This presented three challenges:
- How could we rework incentives to provide the same perceived benefit by customers?
- Would reworking incentives improve the monthly sales?
- How long would it take to determine the impact on sales?
Ultimately we recommended to management that they should limit their current incentives (discounts) to two days per week. During the other days, any customers that would purchase products would be entered in a raffle to win coupons they could cash in on predetermined days. The more products purchased overall, the higher the number of winners. Our recommendations, although fairly simple, were based in psychological principle: to create the feeling of being able to receive the same bargains while decreasing the amount of total discounts against sales.
Results
More transparency over the business' cash flow forecast allowed us to negotiate better terms with vendors as well as maximize vendor incentives (2/10 net 30, 60, or 90). This led to realize a decrease of goods sold of 4%.
Initially, changing the sales incentives had a negative impact on sales. However, we believed strongly in our reccomendations. We knew the that missing feedback will usually cause incentive systems to fail; in other words, we wanted to let customers know exactly how many potential winners there could potentially be. After creating an electronic sign to be updated by staff on an hourly basis, we were able to realize an increase in sales of 16%.
The two overall results we were able to achieve:
- Decrease of Operating Expenses of 20%
- Increase in Net Profits of 20%
Don't take our word for it, take theirs!
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“Ous passed my filter test from just one discovery call. It is obvious his skill set is in place to have an immediate impact on my company's success. I qualify who I do business with based on character, integrity, as well as talent. I look forward to working with Ous based on those qualifiers. Sometimes, if you work hard enough, filter enough, you find people who can accelerate movement towards your goals. I believe I found that in Ous.”
Luke Sandoval
“I really enjoyed our conversation last week. You have a deep understanding about how to set up a business and all the moving parts involved from payroll, to virtual assistants, to book keeping. You know how to get them set up and you've answered all the questions I had about them at the time. You also were kind enough to offer tax help with any questions I send you with a link to the IRS website for each question being asked. I see you play a big role on social media so I know that you've positively impacted several of the business you work with. Thank you for the call and keep up the good work. We'll catch up again soon.”
Sergio Aguinaga
“Not only did you exceeded my expectation but also introduced me to a more efficient way than my accountant suggested which actually ended up saving me money. After the call, I got straight to doing some additional researching and my plan is to submit my information for my LLC on Friday!”
Aleah Epps
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