When companies want to become more profitable, the first place they look it at their sales process, salespeople sales managers and their CRM system. Even though that’s a great place to start, your company’s bottom line isn’t as closely tied to sales as most people would think.
For the average company, every $20 that’s spent requires a $100 sale. And the average company can trim down costs considerably by looking at its top three expense categories.
Here’s what our clients have shared: one client had cost of goods sold as their biggest expense.
When they looked at what they were buying they were able to negotiate annual purchase agreements with three vendors that saved them 27k in the first year that they implemented annual purchase agreements.
Another client shared that their company analyzed manpower costs and changed their hiring policies to limit temporary help to no more than 3 weeks per position, and expanding their full time staff instead, saving 38k in the first year of operations.
When a growing company makes just a few small changes, the results are often pretty remarkable; especially when that savings can be used to offset the cost of something else that the company needs but believes they cannot afford.
It’s almost never about the company’s gross sales. It’s certainly advantageous to make sure that sales are increasing; but it’s also important that the profit margin makes sense. What this means is: that if we look at any sale, the gross profit must generally exceed your company’s overhead and a bottom line margin of profit.
Yes, exceptions are sometimes made but those exceptions need to be reviewed and approved by owners and management. Some companies will base their salespeople’s compensation/ commissions on their gross margin rather than sales for this very issue.
As you can see, keeping everything in balance is a complex issue. Many companies have complex BI (Business Intelligence) systems in place for exactly this issue. I
f this sounds like your company, or you’d like to discuss other challenges around keeping more of the money you make remember: it’s not what you earn, it’s how much you keep that matters. If you’d like to discuss this further email me at email@example.com and lets talk.