I have said many times that more sales does not always equal more profit. However, the growth of a company is associated with growth in sales, with sales that do generate profits.
If your sales are not growing and your fixed costs are high, in a few months you will be in trouble. At some point you will not be able to pay the suppliers' bills on time, later you will have difficulties to raise enough money to pay the return and then other difficulties will come, such as the delay in paying taxes and debts with the banks.
One day you will be working more and earning less. That is not the idea. What is the solution? Increase sales in the lines that generate more profits, seek opportunities for more sales with our strategies, with new approaches, with greater effort on the part of the workers and greater dedication to the customer, improving quality on the one hand and service on the other..
In times of crisis there are also opportunities to generate more profit.
Lowering fixed costs is not always so easy, beyond one point quality and customer service can be affected. Increasing profit margins for some businesses is possible, for others it is almost impossible.
As a consultant, I have seen the enormous effort and dedication that entrepreneurs put into achieving more sales, more products, more branches, more sellers and different types of commissions. Everything to achieve more sales.
I write this article motivated by the urgency of a client. Its projected sales for February 2012 are estimated to be 22% lower than in February 2011. As a group, it is estimated that it will sell 7% more; since it opened a fourth branch in December 2011. But its first two branches will sell less. One 8% less and the other 33% less. This is really serious!
Such situations must be taken seriously. It is not convenient to justify oneself in useless explanations, such as the crisis or perhaps, as in your case, in that as a group it will be growing. In any case, growing 7% as estimated is very little.
Sales at its first two branches will drop 8% and 33%. This is an extreme situation and requires extreme measures.
Thinking about the next appointment with this client, I wanted to share with you also some of the points that should be taken into account to reverse the situation, despite the fact that we are half a month away.
What am I going to suggest to this client on the next management committee? What do I advise you if you find yourself in the same situation?
- You must have quality information to make decisions. About sales you should know, at least the following:
- Sales by product line Weekly sales, the last ten weeks and the same weeks last year. You must know the profit margin of each of your products, or at least of the products that contribute 80% of sales You must know how much each of your branches and each of your sellers sells. If you have "shifts" it would be perfect to know how much each shift sells. You should know what your Average Ticket is for at least the last ten weeks. The Average Ticket is the average sale per customer. It can be calculated by dividing daily sales by daily invoices, it would be perfect if you know the average ticket for each of your sellers.
I promised I wouldn't make very long articles. So I end here. I suggest you read the article and write me your case, at the end of this article there is a space for that. It is not possible to give a “generic prescription” for all cases. These reflections are of general application. I assure you that if you apply them you will achieve more and better sales.