Hi
I won't start a long story as to why i'm in this situation (part of it is documented in some of my other threads) so I'm going to cut to the chase regarding a decision i need to make this week.
My business model is the sale of physical products online via Ebay, Amazon etc. For last 13 years those products have mainly been power supplies/chargers. Turnover is £515,000. Last year business made a loss of £18,000 mainly due a product/supplier issue which resulted in 3 months of virtually no sales. I've decided to get out selling power products as the profit margins are too low and they a commodity item which there is no long term brand value to be created.
I have currently got 3 completely new products on their way to Amazon.com by sea.
I've got £65,000 worth of power supplies in stock at the moment and out of that only around £25,000 of that brings in 80% of the profit (80/20 rule). That 80% profit is usually around £7000 a month. Out of that £7000 a month i pay out £3000 in loans and i take £3500 in salary. The other overheads are generally what most businesses have, staff, building costs etc. This is resulting in a loss each month which can no longer continue. My accountant has told i need to reduce all expenses drastically this week. Taking a reduced salary is not really an option as personally i have mortgages and other personal loans to pay. So here's my two options:
Option 1 - Reduce the stock of power supply lines that don't contribute to bottom line and use the funds to purchase the new range which will sent to Amazon. Reduce all other business overheads - 2 staff, buildings and all other costs and work from home. This would not be ideal as my stock takes up a lot more space than i can fit into my garage and i would be having to pack 100-150 orders a day and do customer services work. Possibly like having a restaurant and trying to serve customers and cook the food at the same time. I know that if i could somehow manage to do this my business would be more or less breaking even until the stock of power products that doesn't sell is replaced by the new lines that do. The 3 products going to Amazon now may generate an extra £3000-5000 a month starting the end of January.
Option 2 - I have a competitor in the power supply business who has already bought some of our stock may be interested in purchasing all my power product stock and possibly my Ebay Store. My Ebay store does on average 100 orders a day which would be worth around £300 in profit a day to him. I could maybe realise £70,000 from the sale of all stock and the ebay store.
Then i'd be a in a position where i had £70,000 in cash to buy a whole new range of products in addition to the $14000 worth of stock i've currently got on route to Amazon. I would then however not have any monthly income until the stock arrives at Amazon and starts selling. I would still need to pay £3000 a month to cover my loans and take some sort of salary. I am however confident that buying £50,000-60,000 worth of new stock would generate more profit than ever before. I'd be buying products with at least 30-40% profit margins after fees.
I understand the risks of having all my eggs in one basket with Amazon but this would only be short term and i would probably send some stock to Amazon across Europe and UK to negate this.
Having too many lines of power supplies not selling and money tied up in this has led me to this point.
Any help or suggestions would be greatly appreciated. I've literally got to make a decision this coming week.
Thanks
Paul
I won't start a long story as to why i'm in this situation (part of it is documented in some of my other threads) so I'm going to cut to the chase regarding a decision i need to make this week.
My business model is the sale of physical products online via Ebay, Amazon etc. For last 13 years those products have mainly been power supplies/chargers. Turnover is £515,000. Last year business made a loss of £18,000 mainly due a product/supplier issue which resulted in 3 months of virtually no sales. I've decided to get out selling power products as the profit margins are too low and they a commodity item which there is no long term brand value to be created.
I have currently got 3 completely new products on their way to Amazon.com by sea.
I've got £65,000 worth of power supplies in stock at the moment and out of that only around £25,000 of that brings in 80% of the profit (80/20 rule). That 80% profit is usually around £7000 a month. Out of that £7000 a month i pay out £3000 in loans and i take £3500 in salary. The other overheads are generally what most businesses have, staff, building costs etc. This is resulting in a loss each month which can no longer continue. My accountant has told i need to reduce all expenses drastically this week. Taking a reduced salary is not really an option as personally i have mortgages and other personal loans to pay. So here's my two options:
Option 1 - Reduce the stock of power supply lines that don't contribute to bottom line and use the funds to purchase the new range which will sent to Amazon. Reduce all other business overheads - 2 staff, buildings and all other costs and work from home. This would not be ideal as my stock takes up a lot more space than i can fit into my garage and i would be having to pack 100-150 orders a day and do customer services work. Possibly like having a restaurant and trying to serve customers and cook the food at the same time. I know that if i could somehow manage to do this my business would be more or less breaking even until the stock of power products that doesn't sell is replaced by the new lines that do. The 3 products going to Amazon now may generate an extra £3000-5000 a month starting the end of January.
Option 2 - I have a competitor in the power supply business who has already bought some of our stock may be interested in purchasing all my power product stock and possibly my Ebay Store. My Ebay store does on average 100 orders a day which would be worth around £300 in profit a day to him. I could maybe realise £70,000 from the sale of all stock and the ebay store.
Then i'd be a in a position where i had £70,000 in cash to buy a whole new range of products in addition to the $14000 worth of stock i've currently got on route to Amazon. I would then however not have any monthly income until the stock arrives at Amazon and starts selling. I would still need to pay £3000 a month to cover my loans and take some sort of salary. I am however confident that buying £50,000-60,000 worth of new stock would generate more profit than ever before. I'd be buying products with at least 30-40% profit margins after fees.
I understand the risks of having all my eggs in one basket with Amazon but this would only be short term and i would probably send some stock to Amazon across Europe and UK to negate this.
Having too many lines of power supplies not selling and money tied up in this has led me to this point.
Any help or suggestions would be greatly appreciated. I've literally got to make a decision this coming week.
Thanks
Paul
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