The cost-of-living crisis hit a lot of businesses hard last year, and Melissa Devereaux’s dog treats manufacturer, Laila and Me, was no exception. People were struggling to put food on the table, let alone buy high-quality treats for their pets. The business was facing retail sales that were the lowest it had ever seen. To make matters worse, the supply of raw materials, including meat, was hard to come by, and what you could get your hands on was low quality but with a much higher price tag.
“Postage costs went up 20 per cent, leaving us with no choice but to put this cost back on our customers, which affected our sales even further,” Melissa explains, “On top of this, a lot of the companies we had been contract manufacturing for ceased business with us, as they chose to go with larger companies that could offer a cheaper rate for their drying and packaging services.”
It was clear that Laila and Me needed to cut back its expenses to get through the rough period. One thing that helped a lot was closing down the warehouses one day a week.
“We worked on a four-day schedule, Monday-Thursday, and ceased operations across both warehouses on Fridays,” Melissa says.
Moreover, the business ran down its inventory and had a lot of products out of stock while closely managing cashflow, Melissa explains. Laila and Me completed an updated range review of all products and checked the margins. The products with the lowest margins were removed from the offering, and the company focused all marketing efforts and paid social media ads on the products with the highest margins.
The challenge taught staff that they can run the business quite lean if necessary and plug a lot of holes. For instance, all team members are now cross-trained in everyone else’s jobs, so they can share casual labour shifts and complete high-priority tasks. This has allowed Laila and Me to make the most from its staffing spend, Melissa explains.
The business also cut down on a lot of subscriptions and worked out how to get the most out of unpaid versions of apps like Shopify and Asana, instead of using additional apps that cost more money each month. Staff also worked on looking at profit and losses more frequently so they could have better cashflow projections and tweak labour costs and paid marketing accordingly. Third-party wholesalers were costing a lot in fees, so the business started to manage wholesalers in-house and trained staff on how to manage wholesale accounts. This move not only empowered the current staff, who now know the products better than anyone , but also saves the business a lot of time, as staff don’t need to go back and forth with the third-party companies.
When asked what tips she would give to other SMEs that want to stay on top of their finances, Melissa says, “We were so used to outsourcing our finances and didn’t fully understand it all until we were forced to learn during a rough period. We would recommend not letting it get to this point, and tracking every dollar going in and out of the business so that when times are tough, you know where you can afford to cut down and can start immediately.”
The business-owner explains that staff now put everything in a cashflow spreadsheet and are looking at this weekly instead of quarterly.
“We would also recommend tracking your marketing spend closely and analysing the return on ad spend frequently,” Melissa says. “You may want to test doing giveaways and collaborations with like-minded businesses as a cheap way to cross-market and acquire new customers.”
Laila and Me is a prime example of how businesses can overcome cash flow challenges and emerge stronger than ever.
This article first appeared in issue 46 of the Inside Small Business quarterly magazine
