Owners love to talk about how great sales are and how well business is doing and occasionally will rattle off names of their largest customers, while in reality the the business is operating on float (dollars in and out) with little to no actual profit.
Over the years we’ve heard about popular brands, now shuttered and usually for the reason of out of cash.
Don’t make the same mistake(s) with your business. Understanding your operation, the core model and thoroughly looking at new sales opportunities is a good and important first step.
Huge volume selling and being busy, does not always equate to a healthy, profitable and successful business model.
A theory of mine is a company’s overall health depends on it’s leadership and philosophy behind the organization. If decisions made are sales based, then there’s a likelihood the new business may not be as profitable as initially pitched and actually contribute to a weaker profit/loss forecast.
If decisions are operational based, the tendency can be a fast return in profit, however closing the sale can take longer in order to properly conduct due diligence and a longer period to decide can result in loosing a potential sale.
My background is operations and many times throughout my career, found butting heads with the sales department. They bring to the table a large deal too great to pass up, but with a few questions and looking further at profit margin and manufacturing requirements, the new business didn’t look so good.
I come from the school that profit be realized in the first sale. Many times a sales pitch will include the point that bringing in a high volume, low margin account will help save the company money by creating better purchasing power or improve efficiency in manufacturing.
More than not, the myth is false and high volume, low margin sales offer added expense to the company in the form of marketing related support.
I suggest a company’s best opportunity for success is a collaborative effort and decision between sales and operations. The result is an increase in the overall opportunity for success as well as timeline improvement.
As for the argument that a large volume account enables the purchasing department to realize better buying power. Unless it’s producing millions of units annually, the argument is simply not true.
Here is my view of the breakdown of a department’s core responsibility:
Sales Department – generate leads, find and close new business, introduce new products, be the face of the company
Marketing (not part of sales) – generate excitement, create awareness and promote reasons to purchase, monitor trends
Operations – effectively manufacturer products, manage waste/loss, make safe and consistent products,
Executives / Directors – if the company is publicly held, maintain balance between efficient/effective manufacturing, shareholder profitability and healthy employee culture.
Contact Darryl who will work with you to make sure your company doesn’t become another casualty caused by making sales that represent more cost than profit.
Darryl helps businesses of all size to understand what a good sales prospect looks like, be long term and most importantly – profitable.
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