Is selling more the right answer to increasing your profits?

When it comes right down to it the success of any business depends on selling a product or service at a price that is set high enough to cover costs and make money for the business owner.

In terms of your financial wellbeing, step one of any business is to cover its costs and make money, because if it doesn’t, then sad as that is, you don’t have a working business. The next stage is to try to make sure step one happens for every sale, ideally on a regular basis. No wonder then that the challenge facing many business owners before I start working with them is how to make the business make more money.

Often, I find they have already asked themselves the question and come to the conclusion that making more sales is the solution. While this seems a sensible answer, mostly because it is a sensible answer, it’s only a partial solution if they are missing a stage in the development process. A focus on increasing sales may not be the magic solution to making more money. In fact, it almost certainly isn’t. Selling more and increasing turnover may well go hand in hand but selling more and increasing profit definitely does not.

Ok, so if a sales push is a good thing to do, why am I suggesting it may not be the right thing to focus on? I’m not. I am just suggesting it may not be the right thing to focus on right now. Take a look at the following scenario.

Why sales are not the magic bullet

The hidden flaw lies in the reasoning that leads to giving too much focus and energy to increasing sales. Here is what happens.

Business owners will follow tried and tested methods and first look at their product or services and ask if there is space in their market to increase sales. They will very sensibly investigate what methods are required to increase sales and what that increase will mean in terms of logistics, and of course, finances. If the result of this seems positive, they will go ahead and implement new strategies, pay out for marketing, add new team members to facilitate the new sales and increase supply to meet demand, whatever works for their business circumstances. All of which should and often does, lead to an upturn in orders.

Then they find that, despite the increase, they are not really feeling much benefit as profit.

Once the dust settles and the sales push is over, they find themselves with increased orders but only a minimal increase on the bottom line. That is because all they have done is effectively increased the speed of the treadmill they were already on.

 

Breaking the sales and low-profit cycle

When I am called in to help with profitability by a business owner, I frequently see that they have already tried this process several times. It’s a cycle that they need to break because a sale is not necessarily increasing profit, it is just creating a burden by increasing activity.

In other words, there is not much point in gaining a big increase in turnover if it means next to no increase in profit.

The question they should have asked first is whether it was possible to increase profits without increasing sales. And the answer is almost always yes.

Take the scenario above and imagine how it would change if you raised margins and lowered costs for your current trading. To start with you would have more money in the bank, which was what we were looking to achieve through sales, without resorting to the expensive and logistically burdensome push for more orders. Not only would you release all the hidden profit in your business, (it is usually there, we just need to find it) you would also streamline your working practices. If you then decided to go ahead with a drive for more sales, you would be doing so from a more financially secure position with fewer overheads. Then when your campaign paid off it would generate more cash in the bank.

In short, a sales push will only work better if you can be sure of making more profit.

That is where I can be of assistance.

Give me a call or drop me a message to arrange a chat and let’s see how much more money I can help you make with the least amount of effort.