Know-How Exchange : Strategy

You might consider working with some of the coffee service companies...if there's room for them to make money to. Then you have regular income.

Michael

Looking at it simply, to raise ROI you need to get more money in or have lower costs. You price is low, so your margin is low. And giving credit is a cost. So you are squeezed.

So, can you raise prices? Or can you reduce the number that pay on credit? Likely difficult, but maybe not impossible.

Alternate route is accept that the retail channel you currently have is going to be low ROI and look at additional channels to sell through. The suggestions by WMMA and Michael are both suggesting this. Find a channel you can sell to that either pays a higher price for the tea, or has lower costs (or better yet, both).

Your question doesn't make sense?

The fact that you give a credit line to your downline retailers has little bearing on your ROI calculation other than the opportunity cost of the money. However, I assume that cash buyer get a discountover credit buyers (if not why not) and the discount given to casj buyers will be close to the cost of money on the 30 days creditline. (I assume you are not giving more than 30 days otherwise it is not crdit is is consignment ).

Your ROI calculation is simple, Total net incme minus total cost of product + marketing and distribution.

Regardless of the fact that you offer credit, a sale is a slae so when you delievr the items to your retailers, there is an accompanying invoice. Items are considered sold.

Assuming that you are charging per pack more than you are spending, then you have a positive return.

It sounds to me as though you need a good accountant that can help you to better organise your cash position. You also need to be sure that you are 'collecting' the payments due on time of course.

Find a good accountant of finance manager who has experience in the retail trade. There is no magic in the retail business, it is one of the oldest industries around and the basic principles and procedures are well known and practiced everywhere. You are not going to re invent the business so try to learn the business first.

Don't confuse your knowledge about tea with knowledge of the retail business. Study how the big tea brands manage their business, how they market their products, how htey distribute their products and what kind of ROI they expect to make (about 3% on turnover)

Remeber that you are in a high volume low margin sector.

Then re work your business model to make it work for your product.

Good luck.

Matthew