Improving profitability through sales
When I first started work I asked my boss “how I can help my customers increase their profitability?”.
He told me that “there is three key areas to focus on and if you focus on them in order, you will help them.” I have certainly found this to be true.
The key areas are, in order: Sales, Margins and Expenses.
Key area 1: Sales
So why do we focus on sales first? The last thing we want to do is focus on expenses because this could potentially reduce our capacity, when sales could increase and fuel that capacity!
Under sales there are specific items to look at:
Do we have the capacity to – if we increase our sales by 20%, 50% or even 100% – to fulfil our customers needs? If not, there’s no point in going out and selling to them! What we have to say is “Can we increase our capacity and how do we do that?”. Do we need additional staff? Do we need additional resources? Now that doesn’t mean that we have to go out and invest in these things straight away, but we need to know that we can access those things if and when we need to.
When a lot of businesses start out they sell anything to everyone in order to drive sales and profitability. As the business grows, they continue to sell the same products but sometimes those products are no longer right for their customers – technology or tastes change – or they may not be products that customers value as much as they did when the business started. By reviewing your product range and making sure that they are relevant to your customers you can maintain or increase your profitability.
- Existing customers
Your existing customers are the easiest to sell to as you already have a trust base – but that doesn’t mean selling just anything to them, it means getting a deeper understanding of their needs. When you’re at their premises or when you’re providing a quote for additional work, are you looking around making suggestions? Suggestions that would actually add value to them? You can ask your customers for referrals or perhaps start a referral program where referrers are rewarded for the referral.
- Find new customers
There are so many avenues to find new customers. Everyone is selling Facebook, Google and every other types of advertising media. But what you need to do is work out who your ideal customer is and what platform you can reach them through. What association do they belong to or magazines do they read? Then you can target them through those means.
- Convert the sale
In your line of business does your customer (on average) get three quotes? If this is the case, then (on average) you should be winning one third of jobs. (This might be higher if you're getting a lot of your business through referrals as the trust factor is already high.) How many quotes are you actually winning and is that number acceptable? If the number is too low, perhaps you need some training to understand the objections and the motivations behind the sales?
By looking at these areas we can help your business increase its sales – where it has the capacity to do so – which is the first way to raise the profit of the business, before looking at margins and expenses.
If you have any questions about this, please do not hesitate to ask.