Many times, when we come into a company, we find that there are three buckets: sales, operations, and finance/accounting. Those buckets create silos – no one goes in and no one goes out. But over the years, we have found that the most successful companies do not have these silos at all. While their title may be in one of these three areas, their duties should always include wanting profitable sales. In business, it’s all about profitable sales, this drives everything else.
It’s All About Profitable Sales
Business is a game… Not life. What does that mean? There are rules and boundaries. Every company has very similar cards to play. Although you can get creative in how to win the game, there are general obstacles that you will face, including:
You have all these people or variables in the game, but driving profitable sales will help win the game. Increased sales with the proper margin increase profitability. As part of management in an enterprise we should all be concerned about sales and margins. Professionals in the finance and accounting department should be equally concerned about sales and margins.
Don’t Get Caught in the “Pitfall”
The Pitfall is that any sales are good sales. Time and time again we have seen enterprises make sales with no margin, or even at a loss. The reasoning for this is that sometimes sales people or management find themselves in a cash crunch and believe that any sale is a good sale. A sale with no margin or a loss actually pressures the bottom part of the cash flow statement. Yes it is true, any sale if collected will drive a cash collection. But if this comes at a no margin or loss of margin this pressures the rest of the cash flow statement and takes away from net cash.
If you have sales and your margins are positive, the rest are just details.
If you struggle with the concept that any sale is a good thing, you are not alone. Under cash flow pressure most managers and owners get caught in the trap that any sale is a good sale because that leads to a collection. A sale without a profitable margin does more harm than good. It eats into your net cash available.
With a sale that contains a positive margin, now you have something to manage. Below the gross margin line you can now manage the details. Are my fixed costs to high? Are my sales and administrative costs under control? Do I have options to bring in cash from debt sources?
Double Your Sales
In April, some of our team went to a large marketing conference in Arizona, called ICON. During one of the breakout sessions, they mentioned that there are four ways to double sales. Since it’s all about profitable sales and the rest are just details, we want to use this week to discuss how to double your sales (and grow your company).
For the purpose of this section, we need to go back to Marketing 101. First, you have your traffic. These are the hits on your website or the company’s in your target market. Then you have your leads. These are the individuals or companies that you have qualified and are already in discussion with. Next, you have your conversions – the clients you convert from leads to sales. Finally, you have your sales price. While this is extremely hard to do when you are established, we’ll go into more detail of how to accomplish that last option to double your sales.
Double Traffic
Traffic is the largest section of your sales pipeline. The more amount of potential clients you have in your funnel, the more likely you are to convert them into sales. For example, if you double your traffic from 1000 to 2000 with a 40% conversion rate to lead and a 10% conversion rate to sales, then you’ve doubled your sales. Let’s work that out though.
Current Sales Pipeline:
1000 in Traffic
40% Conversion Rate
400 Leads
10% Conversion Rate
40 Sales @ $100 per widget equals $4000
Doubled Sales Pipeline:
2000 in Traffic
40% Conversion Rate
800 Leads
10% Conversion Rate
80 Sales @ $100 per widget equals $8000
As technology advances and competition increases, a low-hanging fruit is to optimize your website for search engines, put more Call to Actions on the site, and then improve your sales pipeline. Other options include:
- Networking events
- Referral partners
- Increasing social media presence
- Guest blogging
- Pay Per Click
Double Leads
Get fanatical about doubling your leads! The more leads, the more sales. As we move down the pipeline, it’s going to be more difficult to accomplish (and project). When you double your leads, it qualifies them as a prospective buyer. For example, a candle supply distributor offers a $0-1 wick. That’s a low cost buy-in that qualifies that lead for wanting candle supplies to make candles. Eventually, those leads will be wicks wholesale, along with other candle supplies (wax, aromas, containers, etc.).
Using the same example as above, let’s work out how doubling your leads can double your sales.
Current Sales Pipeline:
1000 in Traffic
40% Conversion Rate
400 Leads
10% Conversion Rate
40 Sales @ $100 per widget equals $4000
Doubled Sales Pipeline:
1000 in Traffic
80% Conversion Rate
800 Leads
10% Conversion Rate
80 Sales @ $100 per widget equals $8000
Double Conversions
Conversion rates should be a financial leader’s best friend! Once you set a conversion rate goal with your sales teams, it’s a great way to hold them accountable and track the likelihood of converting a lead into a sale. You can double your conversions in a variety of ways, including:
- Offering something for free in exchange for an email address, a phone call, etc.
- Asking a lead to purchase something for a small amount (i.e. $7)
- Offering a lot of value for an affordable price (i.e. $50)
- Giving a lot more value for a higher price (i.e. $200)
When you have multiple steps in your sales funnel, it makes it easier to project your sales pipeline. For example, 50% of leads will buy into the first offer (free). 50% of those buy-ins will get the $7 widget. 30% of those will pay $50. And %20 of those will pay $200. But to actually double your conversions, you need to focus on the top first. Then push boundaries to create a vulnerable connection. We’re learning that customers all over are wanting something authentic.
Let’s see how doubling the conversions will double sales:
Current Sales Pipeline:
1000 in Traffic
40% Conversion Rate
400 Leads
10% Conversion Rate
40 Sales @ $100 per widget equals $4000
Doubled Sales Pipeline:
1000 in Traffic
40% Conversion Rate
400 Leads
20% Conversion Rate
80 Sales @ $100 per widget equals $8000
Double Sales Price
Doubling your sales price is extremely difficult to do, especially if you are already established in an industry. But it’s a way to double your sales! For example, Netflix just increased it’s price 10% for some of its memberships. Even though, that only equates $1-2, many were outraged while others were okay. Mckinsey & Company says that, “Pricing right is the fastest and most effective way for managers to increase profits.” There are many variables, including timing and value, that need to be assessed before you double your sales price.
Goldilocks Sales Method – Building Your Sales Pipeline
Regardless of whether you want to double your traffic, leads, or conversions, it’s essential that you now how to forecast your sales. After all, it’s all about profitable sales. This not only protects the cash, inventory, operations, and sales teams, but it protects the executive team from uncertainty. Click here to rebuild your sales pipeline and project accurately with our Goldilocks Sales Method whitepaper.
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