COGS or ‘Cost of goods sold’ is the costs directly related to the production costs of the goods sold, or the services delivered, by your business.
What does the Cost of Goods Sold Include?
It generally includes the cost of materials and labour used to produce the product. These costs tend to make up the variable costs of serving your clients. As opposed to overheads which are the fixed costs of running your business. More can be learnt about the overhead reduction in our article.
Reduction of COGS (Cost of goods sold) is one of the critical areas that every employee within your business needs to understand. Along with price increases, it is one of the quickest ways to make an immediate impact on your business profitability without having to make even one additional sale!
How can you impact your Cost of Goods Sold?
There are a raft of quick wins and relatively easy actions you can take.
These include:
- Buying in bulk to receive an overall reduction in costs
- Changing the materials or service makeup to lower costs
- Leveraging suppliers or sourcing alternative vendors
- Outsourcing or offshoring
- Using technology to automate.
Each percentage gain you make can have a significant impact on not only your profitability but, combined with the other 7 Levers for Rapid Business Growth and Increased Business Valuation, can have a compounding effect on your valuation.
What if you want more than a 1% gain?
Many businesses are happy with these marginal 1% improvements. But if you are seeking to increase those improvements to 5%, 10%, or more (and these are the clients we like to work with), then this is where it gets interesting!
Achieving these substantial gains requires a holistic approach and fresh ideas.
Understanding the full potential of the opportunities available to you as a business leader requires good-quality data, a tech-enabled business design approach, and an innovative approach to your supply chain. We need to ensure all components are working holistically together to deliver geometrically improved outcomes.
Unfortunately, many organisations are so focused on running the day-to-day, along with belief that this is the way to deliver our solutions, that many of these opportunities remain untapped and unexplored.
Intercor's purpose is to help you to transform and optimise your business for growth and value creation. Our long track record of business transformation and change through tech enablement and optimisation ensures our clients' success.
If you’d like to have a no-pressure chat to explore opportunities on how we can help you, book a call with us.
At Intercor, we are passionate about helping businesses be the best they can be through better use of technology. If you enjoyed this article, we would love you to share it on your social media or via the link with anyone else who may find it useful.
We work with large-scale clients who wish to transform and optimise their businesses for growth and value creation. A combination of our cost optimisation services and tech-enabled business design solutions yields outstanding results. Book a call with us to talk through the opportunities.
Why not download the full article and read up on the 7 Levers for Rapid Business Growth and Increased Business Valuation article?
If you enjoyed this article, we would love you to share it on your social media or via the link with anyone else who may find it useful.