Growing Net Profit – Chasing Sales Turnover Without Margin Sucks

Growing Net Profit - Chasing Sales Turnover Without Margin Sucks

So will my sales for my business growth come from service, quality or price?

Following on from my last blog on choosing the markets where your business growth will come from, choosing sales for the sake of increasing turnover sucks.  You invest in your stock/sales cycle, what if you don’t get paid on time, you get queried on quality, or you take longer to manufacture/deliver than you budgeted for. Your business is likely to be eating your valuable time solving these issues, eating cash, and you can’t figure out why making a profit is hard to do.

Using your knowledge of your customers and understanding what is important to your clients is the only consistent way to exceed their expectations. (Read blog post)

Growing Net Profit

Your business sweet spot is where you have a competitive advantage or where you feel you can create and build that advantage over time. Perhaps you product is unique (but it is not known or trusted), your service is the best (but how consistent is it), or your price is the best (but competitors have bigger advertising budgets than you), or your knowledge is so deep that you can meet exacting standards required, or your processes are well tuned and turnaround time is second to none.

Steps to help sales growth

One of an owners’ key roles is to be able to identify key attributes of where your business wants to compete – “quality”, “service” or “price”, or a combination of these three characteristics. It is not possible to undertake all three if your business is to be profitable.

Quality and service outcomes drive you away from competing on price.  The buyer is looking to understand your value proposition and is prepared to pay more for the outcome. It could be as simple as a convenience (due to your location) or a quick turnaround time.

You want to design your business processes so that the profitability of service and quality results in a higher gross margin than purely competing on price.  So if you can leverage that segment of customers willing to pay, the additional gross margin drops into a better net profit, more cash in the business, and ultimately, better drawings for the business owner.

So your sales processes and training need to create the phone or online conversations with your potential customers that allow you to understand and capture what is relevant to the client.  If you capture this correctly, then the match with your sales pitch and the customer requirements should equate to a higher selling price.  Customers purely looking for the best price are unlikely to buy from you as they don’t value either “quality” or “service”.

When I work with business owners as their business coach, we drill down what sits behind why a customer values “quality” and “service”. To do this, within a sales process, is to move customers away from fear, a pain point or frustration, and through your product/service, towards a need or want or aspiration/goal.

celebrating sales growth

If you have been chasing sales, and can’t see the cash in the bank, then let’s drill down on why your turnover sucks.

ABOUT THE AUTHOR

David Lockwood
I help business owners who need to work smarter but also want to know how to optimise their business. I help you work out why your business does what it does, so that you make more money, to generate more cash, and give you back more freedom.

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