Selling More is Dangerous!

Selling More is Dangerous!

It is very tempting for ambitious business owners to focus on selling more product.

But beware – the hoped-for profit rewards can be all too dazzling: there are risks hiding here.

Selling more is an addictive pursuit – especially for new businesses.
But let's take a moment to check some of the risks lying behind that emotional appeal.

  1. You might overwhelm your fulfilment processes, resulting in staff complaining, being stressed into increased errors or going off sick which leaves you with a worse problem.

  2. You might get an increase in the number of complaints you get: roughly 10% of all customers complain, so more customers = more complaints. Are you ready for that?

  3. In some circumstances you might lose product quality, when doing everything in a rush could degrade your production processes. How robust are your processes and controls?

  4. Invoicing speed and accuracy is essential to cash-flow, but the more you sell, the more customers you have to invoice, and the more risk of late payments hurting your cash-flow.

  5. Sometimes a need for speed in selling tempts you to accept deals that are are inappropriate or even unprofitable. Sales management control will be vital.

  6. Sales staff on commission may discover perverse incentives that create opportunities to secretly inflate their reward at the expense of your profits.

  7. Your visible success could tempt your competitors to start a price war, undercutting your profits and gaining market profile by casting you as the bad guy.

  8. Your costs are likely to rise as you promote your sales campaign: market research, advertising, telephone bills, sales literature, fulfilment costs and admin costs...

There may be even more dangers lurking, but surely these few are enough to make us pause and reconsider.

Safer Ways To Improve Profits

There are other ways to increase profits without running the effort, cost and risks of increased sales.

One general area that makes a difference is reducing costs. Savings could be ten times as effective as increased sales volume, quite apart from the the costs mentioned incurred by the problems above.

Another is raising prices. Price increases can be three times as profitable as sales increases.

And are there ways to approach increased sales revenue more safely? I suggest there are:

1. By increasing customer loyalty and therefore reducing returns, refunds and complaints.

2. By reducing the cost of finding new customers by improving marketing and sales efficiencies.

3. By maximising product range profitability to increase revenue-per-transaction.

4. By optimising prices to cope with variations in customer demand.

5. By lowering the impact of cost centres such as shrinkage, storage, errors and waste, etc.

 

Systematic development of management strategies can accumulate huge profit improvements.

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Dave Simon
02.09.2016