Another long lasting boost to your business can be a growth in Sales.
In this section, we outline how such Sales Revenue growth might be speedily achieved.
By the time you reach this point in the Optimise100 Campaign, you may have used the 80/20 Rule to identify the product range that you are going to keep on board.
If not, go back to the Project C2.4 Optimise100 – Cost Reduction and do that step.
Other articles to refer to are:
SM2.10 80/20 Sales Growth: Double Sales, Triple Profits
SM2.1 The Amazing 80/20 Rule
Here we are talking of rapid changes and actions leading to quick returns.
The Campaign “Grow Your Enterprise in 365 Days” works through a calculated improvement in Revenue over time and can be undertaken after Optimise100.
Go to the Campaign: Introduction to Grow Your Enterprise in 365 Days for further details.
Earlier in this Campaign, you identified the best products to provide and the best locations to operate from.
Go to the Project: C2.4 Optimise100 – Cost Reduction for the links to these articles.
We have left it to this point to spend some time identifying the best customers for you to work with.
At first it was necessary to work out what products and what locations you would be servicing.
Therefore, at this point in your Profit maximisation process you may have removed products and locations.
This has possibly resulted in the loss of some customers:
- Losing any customer is painful but might be necessary to boost Profit.
- Some might be held on to by using different Sales channels, for example, replacing face-to-face Sales with cheaper online Sales.
During this step, you will apply the 80/20 analysis to all your remaining customers and rank them in their order of Profitability.
Note that we said Profitability rather than Sales Volume.
If a customer buys a lot of product, but gets a very substantial discount for doing so, they can be less “Profitable” to you than someone who buys less but pays more.
Once you have ranked the customers by sales Profitability, work down the list until you notice a significant drop in the Profit from customers.
Above this point is typically the 80% of Profit that comes from 20% of customers.
Below the cutoff is the 20% of Profit from the 80% of customers.
That is not to say that you shouldn’t focus on the ones that follow the cutoff.
Initially, you should concentrate on the high Profit customers:
- Maximise the Profit by increasing Sales to them.
Once the list has been exhausted above the cutoff, move onto the customers who are comparatively small Profit generators.
Go to the article: SM2.10 80/20 Sales Growth: Double Sales, Triple Profits
By this point you have an idea of which customers you want to sell which products.
The next step is to decide:
- A pricing regime for these customers.
- To bring on board other customers, including some of the ones that ranked low in the previous section on increasing Sales volume.
There is a separate Skills Module on pricing: SM1.0 How 1% Price Change Could Give 11% Profit Increase
Contact us for registration to the Skills Module (3 Skills Module registrations complimentary with this Campaign)
A quick out-take from this is that an analysis of 1,200 businesses showed a 1% improvement in price would have averaged an 11% improvement in Profit.
The term Sales Funnel refers to the flow of potential buyers through a Sales & Marketing program until they (hopefully) emerge as customers at the other end.
Go to the article: 5 Whys Meets Sales Funnel
But, because you are looking here for rapid improvement with the business you already have, the fastest way to improve Sales is to find the TOC constraint in your Funnel.
Focus your attention on that.
Go to the article: SM5.3 TOC to Optimise Your Sales Funnel for more information.
Over stocking products for sale, and for input to your manufacturing cycle, ties up money in Inventory costs.
Clearly, you should try to strip some of these out.
We have discussed this in several places in Optimise100.
C2.5.1 Increase Revenue – Increase Throughput
C2.4 Optimise100 – Cost Reduction
Perhaps even more insidious is the terrible Profit damage that can be done when you run out of stock. These are often your best selling lines (which is why you run out) so not having them costs you Sales.
Quick remedial actions outlined in the Cost of Over and Under Stocking article can plug this hole in your Profit drain.