Boosting sales

Increasing profits...without breaking the bank

Bob Gorton

• Publisher: A&C Black Business Information and Development
• Year: 2011
• Print ISBN: 9780713675412
• eBook ISBN: 9781408139950
• Edition: 1
• Topic: Business
• Subtopic: Small Business
• Index: Business

The...on a Shoestring series helps small business owners grow their business imaginatively, effectively and without spending a fortune. Aimed at entrepreneurs with plenty of vision and commitment but not a lot of cash, each book is packed with ideas that really work, real-life examples, step-by-step advice and sources of further information.

Boosting your company's sales is essential if you're going to make a success of your business. This revised edition covers:

• Looking at your current sales and working out where you want to go next
  
• Making sure you're meeting a need
  
• Playing to your strengths
  
• Looking at your prices (and how you present them)
  
• Talking to and nurturing your existing customers
  
• Looking for new customers
  
• Responding promptly to prospects
  
• Improving your post-sales service
  
• Working to guarantee repeat sales

'a great little package' The Bookseller

1 ARE YOU SURE YOU WANT TO BOOST SALES?

In the beginning, a business starts out with a customer or two and then wins a few more by doing what works well at the time. But time passes, and the business gets comfortable. Often, looking out for new customers and opportunities falls by the wayside. If you’ve found yourself saying any of the following statements, you’ll recognise the pattern:

The things we did before always brought in enough customers, so why should we change?

We tried some promotional things but they never worked. We were wasting money so we stopped doing it.

We don’t know anyone who can help us increase sales effectively.

We had a marketing budget but when times got hard we cut it to save the money.

We are afraid of growing too fast and not being able to cope with the extra business.

If you don’t look for new leads (often called prospects) continuously, it’s likely that your business will end up in a ‘feast or famine’ cycle: you either have no work at all or so much that you can’t keep on top of it. Eventually, though, your business will become overly dependent on a small number of customers. Then margins start to get crushed because the few customers you have are critically important to your business, so when they ask for lower prices it is hard to refuse. The other problem is that no buyer stays around for ever; even loyal customers move on to other suppliers for any number of reasons (none of which you can control), and they leave a void when they go. When times get hard in your market, as they surely will from time to time, a crisis point is reached when something has to be done but by then there is no money left in the pot to do it with.

You’re presumably reading this book because you feel the need to grow sales but don’t have a lot of cash to invest in that activity. This is most likely because the above is horribly familiar. It’s probable that:

you’re running an established business that needs more sales, but not generating sufficient profit to fund the process and can’t get the money to do it from elsewhere.

you’re operating a new, or relatively new, business with hardly any spare money. You’re not alone, though: nearly all young businesses have this problem!

you’re cautious about investing funds and don’t believe that money spent on marketing activity is guaranteed to deliver results, so you resent spending it because it’s all a bit of a gamble.

Sound familiar?

Do you want to boost sales on a shoestring? If the answer is yes, then this book is for you. Except that the title is misleading. It should really be called Boosting Profitability … on a Shoestring. Why? Because improving profit is what this is really all about; increasing the right sort of sales is simply one mechanism for achieving profitable growth.

Warning signs

When you’re planning to boost sales there are many potential traps to look out for, hence our focus on improving profitability as an integral part of growing sales. It’s much safer. Many a business has gone bust whilst increasing sales turnover and it’s a fact that fast-growth businesses are more prone to failure.¹

I believe that rapidly increasing sales is the second most dangerous thing a business can do (after not selling enough!).

Profits slump and overheads hump

Small businesses are particularly vulnerable because they are usually short of important resources like cash. But draw comfort from the fact that the very high risks of rapid sales growth can affect big businesses as well as smaller ones.

For example, in the 1980s, the luxury leather brand, Gucci, set out to grow revenue aggressively on the back of its prestigious name by adding lower-priced canvas products to its range. It pushed products into department stores and duty-free channels while simultaneously licensing its name to appear on a range of items like watches, sunglasses and perfumes.

Gucci’s revenue soared but sales of its most expensive and lucrative products fell away, leading to a dramatic fall in overall profitability. Gucci recovered but had alienated its most profitable customers and attracted a larger but much less attractive mix of customers from the profitability point of view.²

The Gucci lesson highlights an important problem with boosting sales: the strategies that many businesses have adopted to grow revenue have actually eroded profit margins and reduced the bottom line – in other words, they’re selling more but making much less money!

Gross profit

Gross profit is the money you have left over once you have sold your goods or services and you’ve paid for the cost of providing or creating them. It’s critically important because it’s used to pay for the costs of running the business – the overheads – and what’s left can be used to help the business grow. The ‘overheads’ include things such as the rent, heat, light, marketing and so on. Gross profit is so important because if you don’t earn enough of it, then you can’t pay these bills – it’s as simple as that. Once the overheads have been paid for, anything left is called net profit. Net profit is what you’re after, because once you’ve given Her Majesty’s Revenue and Customs their share, you can give some to the shareholders, save it or spend it on anything you like.

Many business operators today focus on boosting revenues, believing that increased sales will bring more profits. This assumption is deeply flawed unless maintaining gross margin percentage is an integral part of the plan. Gross margin percentage is the gross profit divided by the £ value of sales and it is frequently used to indicate how effective a business is at making money from what it does.

Gross margin is the percentage of gross profit related to the amount of sales. So if you sold something for £100 and it cost £70 to produce:

the gross profit is £30 (£100 LESS £70)

the gross margin is 30% (£30 DIVIDED BY £100)

It’s easy to visualise what happens if sales are doubled but the gross margin percentage is halved in the process: the amount of profit will remain the same. If, simultaneously, overheads have increased to handle the growth in trade (more administrative staff, bigger buildings, larger fleet of vehicles and so on) then the outcome can be a fall in overall net profitability.

The result is a dis-economy of scale, which can easily happen if things are not very carefully managed. The little outfit that was profitably operating with 8–9 people could comfortably ass...

Table of contents

• Cover
• Title Page
• Dedication
• Contents
• Acknowledgements
• Introduction
• 1. Are you sure you want to boost sales?
• 2. The ‘One Number’ way to transform your business
• 3. The easiest ways to grow a business
• 4. Getting the price right
• 5. Maximising profitability
• 6. Identifying the right customers for your business
• 7. Being clear about what your business does
• 8. Competing for profits
• 9. Prospecting for the right customers
• 10. Promoting the business
• 11. Promoting and prospecting online
• 12. Working with opportunities
• 13. Tracking and closing
• Imprint