Recommendations for Improving Profitability

This assignment was to advise We Love Our Pets on ways to increase profitability given the company's income statement.  Here it goes:

Wilson & Layton, Inc.

1234 Almeda Avenue

Detroit, MI 12345

(565) 404-9544

September 1, 2010

Mr. Steve Hoover

We Love Our Pets Owner

2447 Wilkins Avenue

Detroit, MI 12349

Dear Mr. Hoover,

The purpose of this letter is to discuss recommendations for improving the profitability of your company, We Love Our Pets.  It is our objective to increase sales volume while identifying ways to cut costs.

In order to further the success your company had in its first year, I recommend expanding the market share of your services and adding a merchandising line.  In addition, I recommend reducing expenses related to rent and supplies.

First, I would like to point out that your wash and trim service is 20% more profitable than your flea and tick removal service.  As you work to expand your market share of these services, I advise targeting the grooming portion of your business.  In order to increase business, I suggest offering a package that includes both grooming and flea and tick removal service.  At your current price, you charge $25 and $30 for these services, respectively.  A bundle option would include the wash and trim portion at $20.  I believe this would increase your sales by 10%, leading to an increase of $14,000 in revenue.  In addition, spending more money on advertising can enhance your client base and lead to greater profitability.

Second, I advise expanding your services to include pet accessories.  This would be an excellent complement to your grooming service and would further increase your sales opportunities.  Items I recommend selling at your shop include pet shampoo, brushes, collars, and dog clothing.  Adding an accessory line will increase the overall profitability of your business and provide clients with an opportunity to do more business with you rather than competitors.

Third, I recommend moving your business to a new location.  Upon researching the common rent expense in the commercial Detroit area, I discovered that you could easily rent an office space for $1,500 per month, rather than $3,000.  This would lead to an $18,000 cost savings in one year without compromising the quality of your business.

Lastly, I suggest you contact your flea and tick removal supplier to work on reducing your costs of supplies.  Oftentimes, suppliers will cut retailers a deal in order to garner more of your business.  If your supplier is unwilling to do so, I recommend searching for other wholesalers who can provide your business with quality supplies at a lower cost.  Building a strong relationship with your supplier can have a tremendous effect on your business. 

Please consider my recommendations for increasing revenue through bundling services and adding an accessory line, as well as decreasing expenses by moving office buildings and developing a strong relationship with suppliers.  I am confident that these steps will positively impact the profitability of your business.  If you would like to continue discussing ways to improve your business, feel free to contact me.  I wish you luck with your business endeavors.

Sincerely,

Emily Diepenbrock