When you hear people talking about sales goals, they’re almost always referring to gross sales. “I want to do $500,000 in revenues. I want my company to grow to $1 million, $10 million, etc.”
But which is more important, sales or profits? Shouldn’t the goal be to increase profits? The money you keep after paying your expenses? Doubling your revenues doesn’t equate to doubling your profits, does it? In many cases quite the opposite happens. Sales may increase, but the profits lag far behind.
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XYZ Inc. is a Mfg Rep Company. It does nearly $6 million in total sales. The manufacturers pay commissions of 30 percent, so the company earns $1.8 million. The company pays out $1.5 million to its 30 employees and other expenses, leaving a $300,000 net profit. XYZ Inc. has nearly 600 accounts, but the bottom 200 accounts don’t do much business with them. They do, however, take up a lot of the sales and service time, effort and attention.
Doing an analysis, XYZ Inc. discovered their 200 smallest accounts spend only $500,000 annually, but take up more than one-third of the sales staff’s available time.
Considering the implications they came to these conclusions:
If they stopped calling on these small (the bottom third) accounts, sales would drop to $5.5 million Commission income would drop to $1.65 million from $1.8
However, they could reduce their employee count and related expenses by 1/3, or $1 million (a $500,000 savings). The result would be a $350,000 increase in profit to $650,000. “Trimming” the business was step one.
We hope you are enjoying this blog article “Lose Weight, Grow Your Business and Business Plan For Both Goals”. To start to build your Business Plan NOW for FREE join our FOCUS Yourself; A 7-Module Business Planning Program.
The sales team identified their “ideal customers,” their qualities, size, values, culture, etc. – customers they wanted to do business with, and then went after them. The attitudes and morale of the organization changed. The salespeople were making more money, and everybody was having more fun because they were spending their time, energy, and effort serving their “A” Class customers. And, with their new found free time, they are able to look for new opportunities and clients with the same profile as their “ideal customers.”
XYZ Inc. can now set its sights on the goal of growing the company to $8 million, and then $10 million in sales, by doing business with only the “best” customers, with much higher profit margins.
So, how can you reduce some excess weight in your business this year?
Here are the three things we just went over:
Trim your customer base. Stop calling on those who take up lots of your time, are hard to deal with, price shop, etc., and don’t do much business with you anyway.
Create a profile of your “ideal customer,” and then find more clients who fit that profile.
Give your best customers a consistently incredible, “wow” level of attention and service.
Then of course use a business plan system that is easy, fast, sustainable and therefore entirely practical to focus on, and be accountable for, the activities that will truly advance your business to new levels of SUCCESS!
WHAT’S THE NEXT STEP?
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2. Use our FREE business planning program FOCUS Yourself; A 7 Module Business Plan Program. This is not a business plan template, it is a full business plan that is EASY and FAST, making your plan SUSTAINABLE and entirely PRACTICAL. Start your business plan NOW
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