How to boost profits when you can't raise prices or cut costs

Posted by Michael Villeneuve on Nov 28, 2013 6:00:00 AM

As a C-level officer, you are responsible for profit and loss, whether you work for a publicly or closely held corporation. Each quarter, and annually, the goal is to boost profits while showing an increase in revenue. Every three months, the cycle repeats, and you face pressure to perform, usually in situations where you cannot raise prices or cut costs. 

How does Corporate Trade boost profit?

Corporate Trade is a way to trade excess, outdated, or returned inventory into cash. The phrase may bring to mind "barter," but there is a distinct difference.

Corporate trade breathes value into diminished assets. It is a way to maintain book value on goods when the only alternative is to discount them or write them off.

Many companies may not realize they have ‘diminished assets.’  These assets can include outdated inventory, aging capital equipment or excess real estate—even unwanted financial commitments, such as sponsorships no longer on strategy.

A Corporate Trade company acquires your company’s obsolete assets (usually at a higher than current market value) in exchange for trade credits. You then combine the trade credits with cash to purchase business goods and services, such as advertising space, travel, logistics and more.

The Corporate Trade provider sells your assets in appropriate sales channels, eliminating the possibility of damaging your brand and reputation.

Corporate Trade retains the book value of your assets, boosting profit while freeing up company cash to invest in growth.

Companies with pricing and cost-cutting limitations

The 2008 recession demanded extreme cost cutting measures from companies, making additional cut backs challenging to find today. And while most companies compete in an environment where price increases need to be restricted, there are certain types of organizations more likely to face increases in cost of goods that simply cannot be passed along.

Companies selling commodities

Commodities, such as chocolate, wheat and coffee, are subject to price fluctuations due to many factors, including politics and the weather. Farmers and processors cannot pass these costs on to their customers, especially if the end-consumer can easily purchase replacement products.

Food companies with bumper crops

Last year there was a bumper crop of tomatoes. This year it is potatoes. Unfortunately, consumption does not increase, even though producers incur additional costs for handling, harvesting and canning more food. This excess inventory has to be dealt with, and hopefully monetized, using a creative solution.

Consumer electronics

As technology and consumer habits change rapidly, electronics companies can often be "stuck" with excess inventory.

Consider a cell phone manufacturer with excess inventory due to a change in technology.

Dumping the products locally is not an option. Instead, the manufacturer sells them to a corporate trade provider who finds an off shore channel for the phones. The transaction boosts the company’s profits and the trade credits are used to help fund other activities, simultaneously conserving cash flow.

The Bottom Line

Using Corporate Trade is a creative solution to sticky accounting situations. Companies are able to realize value from under-performing assets and boost profits, plus show positive quarterly or annual returns.

If you start down this path, choose a reputable corporate trade provider with a long track record of satisfied customers, including brands you know and admire. You may also find it advantageous to do business with a provider who has global reach.

Be a hero to your shareholders or partners this year, and boost profits without adding costs to your P&L—and without increasing prices or cutting costs.

Free eBook - the CSuite Guide to Corporate Trade

Topics: EBIT

Other Topics

see all