Whether you have one year of experience or a decade under your belt, you’ve probably felt the same pains and challenges as any entrepreneur. And you’ve likely realized that nothing will stall a business faster than lack of revenue. Identifying revenue opportunities that can sustain and grow your business becomes paramount, and often the default option is to increase volume. But for boutique drum companies with limited staff and finite hours, increasing production may not always be possible.
MORE VOLUME BRINGS ITS OWN CHALLENGES
It certainly is possible (and exciting!) to grow your business and increase your volume. But when doing it to solve cash flow and revenue issues, it can mask underlying problems and create entirely new issues in the process.
In order to effectively increase your volume, you have to ramp up staffing (labor), invest more money in inventory and spend more money acquiring new customers. All of these things can have detrimental effects on your bottom line and profit margins, especially when you’re ill-prepared to make these investments.
Producing more products requires more man hours, which means an increase in your labor costs. These costs will either have to be passed along to the consumer in the form of a price increase, or will have to be absorbed by you until you’ve gotten more efficient or reached your peak production levels.
Increasing your stock also means you need more lugs, shells and other necessary supplies, which can leave your cash tied up in parts until you move product.
In order to increase your margins, you need to find more customers to buy your products. In order to do this, you’ll likely need to invest more time and money in acquiring new customers. Your customer acquisition cost (CAC), or the cost of acquiring new customers will go up, either in the form out-of-pocket expenses such as ads, sponsorships, social media support, etc., or as your personal time for establishing a relationship, answering questions, nurturing the lead and ultimately making the sale.
Ramping up volume may not always be the feasible option to growing your business. So how, you ask, can you make more money in the same amount of time and effort? As the owner, you have limited resources at hand, and perhaps the most limited is time. What if you could make more money with the same amount of effort? We break it all down for you below.
LEVERAGE YOUR EXISTING LABOR TO INCREASE YOUR PROFIT MARGINS
Wouldn’t it be great if you could keep doing what you’re doing, producing the same number of drums with the same amount of labor, but make more money doing it?
Finishing drums requires precise and detailed labor. Sanding, staining or painting, cutting bearing edges, drilling and assembling are all necessary steps for creating a finished drum kit. By now, you have internal processes in place and efficient ways to finish your drums, turning out finished kits in relatively the same number of hours each time…regardless of the type of wood. If it takes you 10 hours to complete a three piece Maple kit, it’ll likely take you the same amount of time to complete another variety, like Ash, Walnut, etc.
The chart below illustrates the potential profit opportunity with spending a little more on shells and getting a larger return for your efforts.
“Investing a little more upfront for premium shells
pays dividends in the final product sale."
INDUSTRY AVERAGE RETAIL PRICING FOR VARIOUS WOOD SPECIES
IT TAKES THE SAME AMOUNT OF TIME TO FINISH A STANDARD SHELL AS IT DOES TO FINISH A PREMIUM SHELL.
The time it takes to finish a Maple shell is likely the same amount of time it takes you to finish a more premium shell, like Cherry or Walnut. For builders that stick to traditional woods, there’s a limited profit to be made. The difficulty lies in trying to sell a standard Maple kit, for example, for more than $1,800.
But by switching to a premium shell, like Cherry or Walnut, you now have the ability to charge more for the same amount of labor output. Investing a little more upfront for premium shells pays dividends in the final product sale. Genius.