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Lack of results due to unprofitable business areas
If there is not much left at the bottom line despite actually good sales, only complete transparency will help to identify the cause. It is not uncommon for these to be areas within the company that are not generating enough profit or are even being kept alive at the expense of other, profitable areas. The larger the company, the later this often becomes apparent and the more it costs the company. Companies that make use of sound financial management advice are in a much better position here. This is because an experienced financial advisor can create financial transparency right from the start, so that unprofitable areas of the company can be quickly identified and measures can be initiated.
Brings clarity: Check the profitability of business areas
When a company grows, the number of individual departments or subdivisions - in short, the complexity - usually grows with it. Complexity usually means costs. This means that not every service or product line brings in the desired profit. Not every high turnover means a correspondingly high earnings. If the structures are inadequate, every additional turnover brings in increasingly lower profits, which is called Overtrading. In this case, the only thing that helps is to face the facts and ask yourself: should I restructure, sell or close down these unprofitable business divisions? Carrying on as before is the least favorable, albeit most convenient, option imaginable and will cost your company a lot of money in the long run.
Create financial transparency and make decisions
It is not due to a lack of knowledge that individual areas of the company become a hidden cost trap in the long term. Such unprofitable areas are more a sign of a lack of transparency. Once a certain culture of incomplete figures has taken hold in your company, the only thing that helps is complete transparency, by putting all the relevant figures on the table and subjecting them to an honest review. Once the cause of the lack of profit has been found, you should make an equally clear decision to put an end to the negative cash flow and unprofitable use of resources.
The benefits of closing down or selling unprofitable areas
The closure or sale of an unprofitable area must be well planned. First of all, you need full knowledge of all the costs allocated to the area. After that, valid, comprehensive planning of the closure or sale, can improve your company's results.
You can finally concentrate on your core business again without having to worry about too many sub-areas and niches. A fresh start like this is like a liberation and unleashes unimagined forces with which you and your employees can get your company back on the road to success.
Support through professional change and financial management consulting
The many advantages and areas of responsibility of a financial management consultant show how important sound financial advice is for companies. Among other things, the following factors play a major role in financial management consulting:
- Change Management
- Resource planning and control
- Long-term goal tracking (strategic financial management)
- Short-term goal tracking (operational financial management)
- Securing liquidity
- Profitability of the individual divisions
- Planning, implementation and calculation of investments
- Risk management and much more
External financial management consulting: also helpful when selling
If it turns out that a partial sale or even a closure of a business unit is unavoidable, it is not uncommon for a lot of fears to arise. Employees fear for their jobs, you as an entrepreneur are afraid of taking a radical step... When you close down an unsustainable, constantly cost-incurring area, it's like giving up smoking: you give up something harmful in order to (re)gain something more valuable. The help of a financial management consultant is particularly useful when selling a division of your company that is not profitable. This is because they know the process with all its hurdles and challenges from their everyday work and can therefore provide you with support. In addition, you and your employees should take the following saying by the Spanish author Miguel de Unamuno to heart:
In every ending lies a new beginning!
