Interview
“We stopped chasing volume and the business finally worked”
The managing director of a Windhoek manufacturer on cutting the product range by two thirds, losing a third of revenue, and doubling profit.
Cutting the range was the hardest decision, and the one that saved the company.
In an extended conversation, the managing director of a Windhoek-based light manufacturer describes deliberately shrinking a business, and why the numbers got better as the revenue got smaller.
On the decision
We were making 60 products and understanding maybe 15 of them. Everything else was there because a customer once asked. When we costed each line properly, a third of them lost money on every unit.
On the reaction
The market did not punish us the way we feared. Two big customers left. The rest stayed, and started ordering more of the lines we actually make well.
Revenue fell by about a third. Profit roughly doubled. The factory got quieter and the accounts got better.
On what made it possible
- Proper unit costing, including the cost of complexity
- A willingness to lose customers who were unprofitable
- Machine time freed for the lines that earned their keep
- Working capital released from slow-moving stock
On advice to other manufacturers
Cost your products individually before you chase another market. Most small manufacturers here do not have a demand problem. They have a mix problem, and it hides inside a single gross margin number.
