How to make increase profitability through vertical integrationIn the beginning, most start ups are unable to control the various facets of what they offer to a customer. What do I mean? Let's discuss.
Suppose you are a mechanic who has worked for a decade or more in the repair shops of various local car dealerships. You are now a seasoned employee but feel limited in advancement opportunities because you are at the top of the pay scale. You want more. So, you leave the company with all that knowledge and experience but with little capital. You open your own mechanic shop somewhere with some tools but not all the equipment needed to handle the different types of work which may drive itself into one of your shop bays.
Let's suppose a car comes and needs a brake job. You don't have the equipment to turn the brake rotors so you must send that work out to another shop. Lost additional profits because you are not vertically integrated enough to have the equipment to do the job.
Like the mechanic, look at your business and see how your operation may become more vertically integrated to keep more of the profits on opportunities which darken your business doorstep.
I am a CPA in San Antonio and provide bookkeeping, payroll, taxes and more. We offer a free initial visit and look forward to serving your business needs.
Richard J. Garcia | 09/17/2010