Now that we have our current T/CU for each product/service we calculate the minimum T/CU we need to cover all of our Operating Expenses plus make the profit we want. Here's how we do that: Min T/CU = (annual OE + annual profit) divided by annual available constraint...
Deciding on pricing for your products or services tends to consume a lot of time and can even be stressful. Typically we are looking for a price that 1) will help us to achieve our financial goals; 2) meet or exceed the value perceived by the market place (will...
Question: How much excess capacity do you need to have to make a Viable Vision viable? Answer: It depends. Squeezing more capacity out of your existing operation without investment is relatively easy (you read about it in The Goal, Its Not Luck, and Critical Chain)....
Question: Should I factor (sell) my receivables? I could use the cash, but the cost seems too high. How do I make this decision? Answer: This question is hard to answer without more information, so let’s look at an example: Let’s say it costs you $40 to make a...
Cash Velocity Summary There are two cash velocity rules: ● Make sure that the amount and rate of cash flowing in is enough to cover all your business and personal needs ● Be paranoid. Unfortunately, stuff happens. And unless you’re willing to risk losing your passion,...
Increasing Throughput -- Other Considerations In previous sections we have covered raw materials and how to reduce them. We also need to cover WIP (Work In Process) and finished goods inventory. DBR Scheduling* reduces WIP by releasing raw materials at the rate at...
Increase Sales cont. Last time we ended our discussion with this question: So how do you increase your throughput without going into cash trouble? The first step is to examine your product mix. Calculate the T/CU for each product. With this information you can devise...
Increase Sales Increasing sales is a sure fire way to increase your throughput and is theoretically limitless. My first question is: Are you selling all that you can now? If you are a “make to stock” company, do you ever have the case where you don’t have the product...
Increase Selling Prices Changing the selling price for a product or group of products is difficult to cover in few words. Presumably you already have pricing policies and strategy that represent some equilibrium point in the market you serve and getting some minimum...
Continuing our cash velocity discussion... Deceasing sales commission is not necessarily where we want to focus either, but make sure that the commission you’re paying is in alignment with where you’re making your money and/or with the products/services with the...
