Rethinking Expansion for Maximum Profitability
National Charity Services started Thrift It in October of 2008. Thrift It is a second hand good seller working primarily with the non-profit industry. Thrift It’s largest current product line is used books. With a 9000sqft warehouse in Washington, DC they sell on average 3000 books per week. Based on National Charity Services reputation opportunities arose to expand the business outside of the Washington, DC Area. Here is a brief overview of why those plans have been scaled back to maximize operations and profitability.
The original plan was to open another full service warehouse in Philadelphia, PA. This would include a complete production, sales storage, and shipping department set-up. This would also include hiring an additional 15 employees. There is ample supply in this market place to develop a profitable business. All early projections showed that this business would require significantly less start-up capital then the Washington, DC store giving it a break even point of 180 days.
We started requisition in April of 2009 in order to start building inventory for the new store. As we were doing so we started to analyze our plans in coordination with a sinking economy. We then decided to create alternative income plans for the Philadelphia, PA facility. These plans were meant to examine all possible alternatives to installing a full new facility. This turned out to be an excellent idea that will save us about $250,000 in our first year of operation.
What we decided to do was to install a smaller production line and not to install a sales and/or shipping department. Instead the two employees we hired (instead of 15) will sort our raw material and then take the 15% that is sellable and box it up for delivery to our Washington, DC facility. This will offset approximately $5000 a week in costs for a monthly transport fee of $500.
We are still doing the expansion in so much that we are taking all the raw material we can find in Philadelphia in order to gather sellable merchandise to ship down to our already set-up facility in Washington, DC. The savings are enormous. We will not need an additional facility. We will not need additional employees. We will instead take advantage of under capacity in our DC facility to maximize profitability.
It is important that all business owners examine every possible idea when trying to expand. With a little bit of research and some creative thinking it is possible to reach your expansion goals while still keeping and eye on maximum profitability.