A business is rarely profitable or unprofitable across the board. It consists of parts – products, channels, seasons – and some of them carry the others. The problem is that you rarely know which. Here's the method, and three examples showing how different it can look.
Count backwards
The method comes from Hallands Matgille and their Matgille model, and it works the opposite way to the usual: instead of adding up what the year gave, you start with what you want to be left with – and count backwards to what it takes.
- Start with you. What do you need to be well – in income, in working hours, in time off? Adapt the business to that.
- Split the business into smaller parts. Per product, per channel, per season. Profitability hides in the average.
- Build a model you can play with. What happens if the price rises 10%? If the range is halved? If an employee joins? A model you can change is worth more than a perfect report on what already happened.
Three examples to work through
Click through them – the numbers are fully worked and easy to recognise:
The brewery with twenty beers
A small island brewery brews 14 beers, 4 seasonals and 2 experiments – twenty products, sold in the farm shop, to restaurants and at markets. Customers love the range. But production planning is messy, the ingredient list long, the batches small, some beers sell slowly and go stale. The brewer is constantly stressed.
How to count
A broad range costs more than it appears to: waste, changeover time and stress. Fewer products, better made, give both money and calm – and rarely fewer customers.
Which of your products sell slowest? What would happen if the three smallest disappeared?
What the three have in common
In all three cases the answer was already inside the business. Nobody needed new marketing or more customers – they needed to see what they were already doing. The brewer earned 144,000 kr by brewing fewer beers. The baker sold out every day of a product that cost money. The grower could hire, but only once she knew what it would take.
That's why this step is the heart of the module: when you can split the business into parts and work on one part at a time, finance stops being a fog and becomes a series of decisions you can actually make.
Do this next
Pick one product – ideally your best seller – and work it through like the bun in example two, overhead and all. Keep the number, you'll need it again. Next step: plan the year.
"Count backwards" and the Matgille model were developed by Hallands Matgille, who also offer advice and coaching for food businesses.