Is Increasing Sales Good?

Is Increasing Sales Good?

Ruth King
Contributing Writer
Profitability Revolution Paradigm

I’ll bet most of you said “Yes”.  The REAL answer is “It depends”.  Here’s why:

I worked with a contractor who continually increased sales from year to year.  He was happy with the growth of his business, He always had cash in the bank.  He reached about $2 million in sales and growth stopped.  All of a sudden he could no longer pay his bills and he was struggling.

That’s where I came in.  An analysis of his business showed that he was actually losing $0.05 for every dollar that came in the door.  How can you do that?  Easily.  Don’t track your inventory. Don’t do job costing.  Don’t track your jobs to ensure that you bill everything. Rely on your accountant to do your tax returns and give him insufficient and inaccurate data.

The reality he didn’t understand:  Volume is Vanity – Profits are Sanity

It would have been better if that contractor had increased his profits by 5{938cd9e8dae860e800efc538277d4f7684e6f6981618ba70d1c34357a53c2e1f} per year rather than increased his sales by 5{938cd9e8dae860e800efc538277d4f7684e6f6981618ba70d1c34357a53c2e1f} per year.  However, it is much easier to increase sales – just raise your prices.  Increasing your bottom line takes work.

Ask your employees how to increase your bottom line in terms they can relate to.  They know where the waste is.  If you ask, “How can we increase productivity by $10,000?” they will probably give you a blank stare or say “I don’t know.”

They will probably have ideas if you ask, “How can we reduce expenses by $100 per month?”  This is a number they can relate to.

Implement their ideas whenever feasible.  It improves your bottom line and it makes the employee feel good because you implemented his suggestions. That person will likely contribute other ideas.

When creating your 2018 budget, plan to keep sales volume even or even lower than 2017 while increasing your profits by 5{938cd9e8dae860e800efc538277d4f7684e6f6981618ba70d1c34357a53c2e1f}.  You’ll have more cash in the bank and less stress.