Grow your business the smart way: 4 steps to achieve sales growth for profit…
There’s no shortage of advice on how to grow sales. But sales growth for profit? That’s something entirely different.
Often sales advice focuses on the mechanism of how to sell, or exhorts you to sell more, grow bigger, and always be selling.
But growing sales without growing profit at the same time is a waste of everyone’s time and energy. The only people who benefit are one-off customers chasing sales discounts that are too good to last (because the seller usually goes out of business).
So I’ve broken down the steps into how to achieve sales growth for profit below…
Step 1: Start to plan to increase your sales
The first step to growing sales and growing profit is plan to increase your sales. Decide to act!
Determine how much extra profit you want to make. This is your target. Every other decision relates back to how much additional profit you want.
Work out the gross profit you make on each sale. This is the sale price less the cost of making the sale.
Don’t include fixed overheads like rent, wages or general running costs, as they don’t change with increasing sales volume.
Before you make a profit, the gross profit from your sales needs to cover all your fixed costs.
Step 2: Calculate the volume of sales you need to achieve the extra profit you’re targeting
Identify who your best types of customers are.
Do they want to buy the products or services you sell or do they have other needs? Will they purchase from you at the price you need to make a profit?
Identify what you’re going to sell to your existing customers in greater quantity or in new sales.
Also identify the new sources of customers who will want to buy your existing products and services, at a profit.
Step 3: Determine how you’re going to promote your new sales strategy and attract new customers
Get to know how many enquiries result in a sale. This is called the “sales conversion rate”.
The higher this rate, the fewer sales leads you need to have at any time. To improve your conversion rate, you need to target your sales activity towards the types of customers you’ve identified as your ideal customers.
Step 4: Make it happen by getting active and avoiding common pitfalls
Identifying how much additional sales volume you need to achieve higher profits is the easy part. You then need to implement action that gets you there.
If it’s really that simple, why aren’t more businesses achieving profitable sales growth year after year?
It helps to understand the four main stumbling blocks to growing profitable sales:
Lack of implementation – only 10 percent of strategies are implemented.
Lack of measurement – with today's accounting, sales and crm apps, it’s so easy to do but often neglected.
Lack of review – you’ve implemented a new strategy and are measuring results but what do the results indicate? Is your strategy effective? You need to review it.
Lack of accountability – without accountability it’s easy to avoid taking action to implement, measure and review and generally nothing gets done.
Failure to implement is usually related to the business owner having too much to do already. They are so busy working in the business and don’t have time to stop and work on the business.
Many business owners don’t have the right tools to capture and measure information. Those who do are often too busy doing to utilise them correctly and interpret the information.
This is where engaging an adviser who understands how to grow a business can make or break a business plan aiming for sales growth for profit.
By focusing on the whole business and identifying the efficiencies that can be unlocked, the necessary time, resources and expertise are available to identify what needs to be done and make sure the right strategies are implemented.
The success of new sales strategies depends on getting these early steps right and making sure they do get done.
Once implemented, success must be measured to ensure that the results achieved are as planned, or you will need to adjust the strategy.
Get all parts of the business working for profitable sales growth
Sales growth is important to growing a business profitably but it’s only one part of your overall business strategy.
All parts of your business growth strategy need to work together to achieve the best result with the best use of your scarce time and resources.
Your adviser can help in the following areas:
Business Health Check – analysing where your business is now
Strategy for quick wins – what should be fixed first for immediate results?
90-day plan – the key steps needed to implement the strategy
Measuring results – tracking what’s happened
Review and refine – is it working? If not, how do we adjust it?
Success – how you know when you have you achieved what you set out to do