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ever wondered why some companies make more money than the other? Why do some have a higher ROI despite being in the same area as you are? While others complain of deteriorating margins, these guys make good money without any problem at all?

The ROI is a simple report, but understanding their effects can help you get a very long way to go as that contractor. Simply return divided by investment. You can increase your profitability, which means increasing your sales price. And you can reduce your investment and enjoy the same yield increased profitability.
To take a simple example, if you sell something for $ 100 and made a profit of 20%, could increase this to 50% profit if your investments fell to $ 80. A 20% decline in investment led to a 30% increase in profitability.

The important observation is that it is inversely proportional to each other.

Another important observation is that costs continue to fall, profitability increases with increasing speed. So they get more of. Better for you because they will lead to a situation of growth-related jump

How to interpret the

Now that we know the mathematical formula of ROI let’s see what we can do and what we can not do. In many cases, particularly in the online business, increasing your selling price will be a suicidal act. Many companies are built at the expense of superiority. Customers want cheaper products, which are of equal quality, especially when they see that quality is the same.

Take a customer to buy a phone from you or your competitors. You know it’s the same phone, and they will not pay for your inability to pay to manage your operations effectively. Thus, the selling price is essentially market driven.

But this is the case with costs as well? Most retailers think mediocre is the case. So to sell at market determined prices and pay these costs and make the gain of the market. But the smartest are not something different. They know that what comes out of his bag under his control.

Now just think how you can reduce your investment in a company. Each time you pay for a purchase, and every time you sell you will receive. For a retailer, on average, is the chronology of events that take place in a transaction:

• On order for raw materials
• pay and we hope
• pray and wait on customers seem
• Sell and

payment Pay special attention to cash flow. The money leaves your pocket and back two points to four points. Plus the time difference, the greater the amount of money you have to sit as an investment, since most people buy in bulk and sell in small lots. To pay a large sum in advance (investment) and we expect that small parts, again a benefit.
Imagine how this situation is:

• you receive, sell and payment
• College of suppliers of goods and take />

this money in your pocket at the point and leaves at three points. Technically, there is no need money to run your business. The people running for you.

The analysis based on power

Anyone who has control over marketing control over suppliers. So, what makes you to have control – lower prices. And who funds these price reductions? Their suppliers.

The rules of sales financing

It is wrong to conclude that anyone who goes there and cut prices to win market share and then you can take Go to the control of the supply chain. We must start from a careful analysis of many factors such as:

• Power: Power is not referring here to the raw power. It depends on the ability to make decisions. If you can break a relationship with a supplier and others that deal, then he can not find other customers as good or as big as you think you have the power. This brings us to the classic dilemma, how to build a start-up power? The answer is simple, with people who are relatively small. The idea is that the relationship as an equal give-and-run business to break even for a while until you regain control of the distribution and use this control to credit, do what you get profitable.
• Fixed Costs: If has undergone a large amount of your fixed costs, this strategy will not work. You can not ask your provider to pay the rent or employee, they would simply look through and you want to get rid of you as quickly as possible. Even if you make them pay out of pocket to fix only. Your work must be, how many of your conversion costs to variable costs wherever possible, and give each manufacturer is responsible for taking care of them for a certain period of time.
what your sales increase, and thus see their sales increase, they will be sharper, and provide trade credit you can use the money to run your operations with virtually no money down.
• Create the attraction effect: The whole system is running, because the customer pays money in advance and accept a late delivery. Such is the rule for online companies, and you do not have an effort to create this change. Under no circumstances should you pay before you receive. The idea is relatively greater than the supplier and customer. You should work on the most effective bargaining power of each page for them.
• Plan camp-out: In such cases, if you buy locally, there are cases where you took the order, but the provider does not have the goods. So make sure you have an emergency plan. By suppliers who may be waiting a bit more expensive. Remember, your customers are the source of power. If you have a loss or low profits should take to protect your reputation, you do so. Once you have made a commitment to always offer.

Consider a few numbers:

Each time you run a system, certain numbers are important parameters to give you the health of your operations. They are like a barometer of your success. For this strategy to the supplier and customer financing, here are the key figures:

• The cash conversion cycle: It is the difference between when you pay and the time to wish you welcome. This number must always be negative. The more negative it is better for you. This means that you drive with your gas supplier.
• Working Capital: This is another measure for the same thing. Working capital should always be negative. This means that your property will be less current liabilities. You will always have people owe money, but you do not have to worry about, since you already have money and it is irrelevant.
• Inventories: Again, this number should be reduced. Although this can not be negative, and you can not exceed -5 goods are stored with you must be a number, as near as possible to zero. Only things that you see a request must be purchased in advance. The rest must be acquired after receipt of order.
• Turnover: This is a number that continues to grow. To effectively exercise their power through the supply channel, the vendors you need to see as an important customer. Someone who will make their revenues grow. Their sales grew only when do yours.
• KING: Keep an eye on your ROI and those of others. Remember, there is a power game and if someone else starts selling, they fly suppliers and maybe even your entire company.