When more sales aren't the answer28th February 2018
Now here’s something most business owners get wrong.
You look at the books….
Realise that you don’t have enough cash coming in – money is tight….
And immediately jump to the conclusion that you need more sales.
Closing all open deals, phoning up old contacts and pushing your sales or marketing team is suddenly a top priority….
Except that upping sales isn’t always the best solution.
“So Garry,” you might be thinking, “you’re trying to tell me that if I need more cash in my business, I don’t need more sales?”
Well, not necessarily.
There’s no denying that sales are great, and if you need them because your business genuinely wants to grow – not “just” to make up a cash shortfall – then that’s the way to go.
But I cringe when I see companies that want to improve their cash flow focusing all their resources into generating sales before they’ve looked at a much easier solution.
What if you instead took a look at your profit margins?
In many cases, improving those can make a significant difference to your profitability.
It’s quicker, easier and cheaper to achieve.
And here’s the bit most business owners don’t realise.
If your margins are too tight and you’re not making enough profit on any single sale, then focusing on sales could be a misguided waste of resources. Turnover may rise but you won’t be much more profitable and your cash issues won’t go away.
It’ll look like you’ve grown superficially, but you’ll still be worrying about paying your bills, your staff and yourself, and you still won’t have the cash you need to buy new equipment, invest in more employees or whatever it is you need to genuinely grow.
If margins are a problem, you need to fix these before increasing sales.
Ultimately it all comes down to having a firm vision of where you want to drive your business.
Want to maintain current levels, but have more cash available? Look first at profit margins.
Is growth a priority? Look at sales – here are 10 ways you can increase them - but give your margins a check-in and check-up as well. You should be revisiting and re-analysing your margins for efficiency, anyway, because practically every business can become more profitable this way.
If you’d like to run a tighter fiscal ship, and make sure that every sale you bring in generates maximum profit, let’s talk. We can work with you on improving your margins – paving your way to cash flow stability and genuine growth.