“We need to increase sales!”
“Alright team, here’s the sales goal for this week.”
“What are the sales reports looking like?”
Sales, sales, sales, sales, sales. That was the name of my game for my first few years in business.
And in complete transparency, we increased in sales yearly. However, that didn’t mean we increased in income every year.
If you’ve ever experienced a big increase in sales, only to see your profit margin decrease, and your income stay the same, you know what I’m talking about. It’s frustrating. And can take the joy out of the “win” of increased sales.
Your sales matter, don’t mistake me on that! But the mistake I made was only monitoring sales through the year, and then checking in on profits at the end of the year. And, I’ll just tell you, you have to work harder to grow your business through increasing sales. While you have to work with more discipline to grow your business through increasing profits.
Here’s the steps I recommend for shifting from an “Increase Sales” mindset to an “Increase Profits” mindset.
- Read the book Profit First by Mike Michalowicz. This book will give you the mindset shift and tactical strategies you need to make your business more profitable. It’s a must read in every business library.
- Analyze the profitability within each of your programs, products, and services. I closed down 3 great programs at the end of 2016. They sold well, clients performed well in each of them, and we got solid feedback. But, they required a lot of work, the profit margin was lower than our other programs, and we didn’t see those clients turning into repeat clients. Look at your lineup of products, services, and programs. What programs make you the most money? Not which sell for the highest amount, but which earn you the most? Focus your sales in that area.
- Schedule a monthly profit meeting. Go over your Profit and Loss statements with your core finance team. Employees don’t necessarily need to know about the profitability. But you need a second set of eyes on the profits with you. We’ve been so primed to think of growth only in terms of numbers on the scoreboard. Sales, sales, sales, sales, sales! It’s going to be a big shift to profits, profits, profits, profits! You will need someone to support you in making the changes in operations in order to increase profitability.
- Follow seasons of expansion with seasons of stability. Growing your business is expensive. When you are expanding your team, or building a new office, or increasing your marketing, your profits naturally go down. It is important to choose wisely about when to grow, and it’s important to follow it up with a season of stabilizing the growth. We’ve all seen businesses go out of business because they grew too quickly and couldn’t keep up with all of the demands. Don’t fall into the trap chasing bigger and bigger things only to find yourself in trouble. Stabilize that growth before you look at your next expansion.
- Change your mindset. This has been a big one for me. I had to really be honest with myself, was I building this business for me and my family? Or am I building it to look good for others? What do you value? Align your business with your personal goals. If you have a business you are happy with, what does it matter what anyone else thinks?
Profitability should be the number one thing we look at. And our sales goals should line up with our profitability goals.