Are Your Sales Costing You Money
The sales process always contains an element of emotion, even if it is a structured tender, because for every purchaser there is a risk. As all small business owners have to be sales people, it is very important we understand this emotional side, but we also need to look at the numbers.
What are your costs per sale? Some costs are obvious, such as advertising and commissions, but others may be less explicit and therefore overlooked. Depending on the nature of the business, these overlooked costs can be significant and in some cases overwhelm the other costs.
While these costs will be picked up in overheads, they should be directly allocated to each sale to determine the impact on Gross Profit. For smaller value sales, the Gross Profit may actually be eliminated making every sale a loss maker.
To uncover these costs your sales pipeline must be analysed. In most businesses there are a number of steps to a sale. A typical sales pipeline may look like this:
1. Initial Enquiry
2. First Appointment
3. Quote preparation
4. Sales Meeting
5. Close the Sale
Not every enquiry results in a sale. Not every initial appointment produces a sale. Nor every quote or sales meeting. But each step requires time and is a cost to the business. Even before the enquiry, there are also the marketing costs. What is the cost to the business to generate each enquiry?
While this might seem relatively obvious, few business owners can tell you the true cost per sale at every stage with the costs of failed stages included with the successful ones.
Once this data is analysed, it is possible to determine where the opportunities lie for reductions in your costs per sale. More often than not it is in a place that owners have assumed to be unimportant.
While the ka-ching of the cash register may be music to your ears, make sure it is playing a tune that you can afford to enjoy over and over again.
All you need to do now is to Empower yourself and take action …
May Your Business Be – As You Plan It.
Dr Greg Chapman – The Profit Whisperer
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