Tag Archives | Sales

Black Friday

In America, Black Friday is an event that is not only the most shopped on day during a typical year, but it also generates huge sales.

“Only in America do people trample others for sales exactly one day after being thankful for what they already have.”

~Author Unknown

Black Friday Definition

The Black Friday definition is a retail store sale that occurs the Friday after Thanksgiving – an American holiday in November. Many consider this event to be the kick-off to the Christmas shopping season. Many retailers, such as Walmart, Kohls, Kmart, Macy’s, Express, and other major retailers, open their stores in the early hours of the morning to receive the first rush of customers. Door busters, sales, huge discounts, and giveaways are all part of this event.

The History Of Black Friday

Black Friday originated in 1952 as the start of the Christmas shopping season. Because many states in the United States considered the day after Thanksgiving to be a holiday as well, retail shops realized that there were enormous amounts of potential shoppers available during this four-day weekend. But since 2005, this event has launched into record numbers for sales, shoppers, etc. For example, sales dropped for the first time since the 2008 recession in 2014. Yet, sales boasted $50.9 billion over that weekend.

Although not all states in the United States permit workers to work on national holidays or even the day after Thanksgiving, companies have broken many boundaries to take advantage of this rush of customers. Over time, retail stores and e-commerce platforms have expanded on Black Friday to include Cyber Monday. It’s become a tradition to many.

Cyber Monday

Because Black Friday became such a hit, online companies created another shopping event – Cyber Monday. It occurs the Monday after Thanksgiving and encourages shoppers to purchase more gifts and things on Monday. Originally, it was launched in 2005.

The Cost of Black Friday

While it may be tempting to join in on Black Friday specials and sales, you have to consider the cost. Remember, a sale isn’t necessarily a good sale. It has to be a profitable sale.

Some of the costs associated with Black Friday include.

How to Win on Black Friday

In order to win on Black Friday, you have to price your products for profit. Especially since you project to sell large quantities of product, you need to make sure you don’t start with a pricing problem. If you cut prices off a product that is already not profitable, then you will loose more potential profit. Before you start planning for Black Friday, make sure your pricing is in check. Click here to download our Pricing for Profit Inspection Guide.

Price for Profit During These Sales

Each sale you make has to return a profit. Therefore, you need to allocate as many costs to each good to make it easier. How much inventory do you need to push in order to turn a profit? But also, what prices are customers willing to spend? The trick with Black Friday is that since everyone is competing for the best deal, you must know what others are pricing the same product at.

Reduce DSO by Turning Over Inventory

The risk for big sales like Black Friday is that there will be some that cancel their credit card transaction for $1,800 worth of product. Because you are putting a lot of cash up front to increase inventory, you need to collect cash as quickly as possible. For example, you can offer discounts for cash only. For other pricing tips, download the free Pricing for Profit Inspection Guide to learn how to price profitably.

Black Friday

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Black Friday

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It’s All About Profitable Sales, The Rest Are Just Details

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 salesIt’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?

If the focus of your company is on profitable sales, then it’s crucial that you forecast or project your sales accurately. Click here to access our Goldilocks Sales Method whitepaper to build your sales pipeline and project accurately.

It's all about profitable salesDouble 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
When you double your sales with traffic, it can be difficult to put together your sales projections. Click here to download our Goldilocks Sales Method whitepaper to learn how project accurately.

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.

It's all about profitable sales

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It's all about profitable sales

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Business Valuation Purposes

See Also:
EBITDA Valuation
Valuation Methods
Multiple of Earnings

Business Valuation Definition

Business valuation is the process of determining the economic value of a business or company. It assesses a variety of factors to determine the fair market value in a sale, but there is no one way to verify the worth of a company. Business valuation can depend on the values of the assessor, tangible and intangible assets, and varying economic conditions. Business valuation provides an expected price of sale; however, the real price of sale can very.

Traditional approaches to business valuation employ financial statements, cash flow models, and comparisons to competitive companies within a similar field or industry.

Business Valuation Methods

Income Approach: determines business value based on income. This type of valuation focuses on net cash flow, discretionary cash flow, and capitalization of earnings.

Asset Approach: determines business value based on assets. This type of valuation focuses on both asset accumulation (assets minus liabilities) and capitalized excess earnings.

Market Approach: determines business value in relation to similar companies. This type of valuation focuses on the comparative transaction method and appraises competitive sales of comparable businesses to estimate economic performance looking at revenue or profits primarily.

(Are you in the process of selling your company? The first thing to do is to identify “destroyers” that can impact your company’s value. Click here to download your free “Top 10 Destroyers of Value“.)

Business Valuation Purposes

Although the primary purpose of business valuation is preparing a company for sale, there are many purposes. The following are a few examples:

Shareholder Disputes: sometimes a breakup of the company is in the shareholder’s best interests. This could also include transfers of shares from shareholders who are withdrawing.

Estate and Gift: a valuation would need to be done prior to estate planning or a gifting of interests or after the death of an owner. This is also required by the IRS for Charitable donations.

Divorce: when a divorce occurs, a division of assets and business interests is needed.

Mergers, Acquisitions, and Sales: valuation is necessary to negotiate a merger, acquisition, or sale, so the interested parties can obtain the best fair market price.

Buy-Sell Agreements: this typically involves a transfer of equity between partners or shareholders.

Financing: have a business appraisal before obtaining a loan, so the banks can validate their investment.

Purchase price allocation: this involves reporting the company’s assets and liabilities to identify tangible and intangible assets.

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Why Do Most Financial Projections Fail?

Do you know the number one reason most financial projections fail? It is because sales are over estimated!

Why Do Most Financial Projections Fail?

This time of year we are busy working with clients preparing projections for the next year. What we find is it is very difficult for clients to do an accurate financial statement projection if they can’t project sales. Working with companies to project the top line of the financial projections is the hardest part. Once you have the top line the rest of the projections fall into place based on historical numbers.

How To Project Sales

So how do you project sales? We generally start off with last year’s sales numbers. We ask ourselves do we think they are going to increase or decrease? If so, then by how much? We determine by product line how much sales we need to be profitable. We look at recent sales trends and review them with the sales team. Finally, we prepare a backlog schedule with identified sales on a monthly basis. The greater the backlog identified, the greater the accuracy!

When projecting sales it is important to be reasonable. You should strive to “under promise and over deliver”. Often the management teams strives to set the bar high for goal setting purposes. You don’t want to shoot yourself in the foot with your banker if you miss you projections by a wide margin! It is better to come in a little above your projections rather than quite a ways below your number.

What has been your experience in projecting sales?

If you need help creating an accurate forecast, then download our free Goldilocks Sales Method whitepaper to project accurately.

most financial projections fail

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Declining Sales: How low is low?

If you are like most companies I am talking to these days your sales are off from there high for last year. Nobody is immune and there is no place to hide! You have had declining sales for the past six to 12 months with no end in site. So what sales volume should you anticipate going forward?

Declining Sales

In speaking with several entrepreneurs over the past few weeks I have come to the unscientific conclusion that most companies severely impacted by the recession are experiencing sales declines of 25% to 33% from there highs for last year. Of course there are exceptions, but, for the most part, this percentage hold true.

As to why this is taking place I have my theories. Though there obviously is a recession going on, more importantly, there is a complete lack of confidence in the future. Most companies are still making money though all are hoarding cash.

So if you anticipate sales dropping 25% what do you do? We are recommending our clients prepare a “worst case” scenario using a break even template. You should identify what cuts will be required to survive a sales drop of this magnitude. If and when a sales drop occurs you will then be in a position to take action quickly.

Just tell me where the bottom is and I can make money!

It’s hard to project sales when they are declining. If you need to project your sales accurately, then download our free Goldilocks Sales Method whitepaper.

declining sales

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A Whole Lot of Kissing Going On!

If you were like me for the most part you took off the last two weeks of the year and coasted at work. Most people didn’t want to start new projects or make sales calls. It seems with 2 1/2 work weeks and the emotional stress of the last quarter everyone need a break. I know I did!

But this first week back it seems everyone is coming out of the woodwork! We are getting tons of emails and phone calls. Everyone wants to meet and follow up on introductions. I can’t seem to get to them all and still get my work done. I have been going from meeting to meeting and talking on the phone half the day.

Yesterday I finally sat back and asked “what’s going on?” I thought about who was calling and what was the short term results? I came to the conclusion that there is a whole lot of kissing going on, but, not a lot of sex!

What I mean is that most of the people wanting to meet were other service providers who wanted to network but didn’t have much business going on. There wasn’t any actual sales leads coming in. It appears that everyone is hitting the ground running trying to work twice as hard to generate the same amount of sales. Not a bad idea!

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Should You Cut Marketing Expense in a Recession?

Most CFO’s cut costs to obtain profitability for the company. In a recession that is often the best course of action. The question is: what kind of knife do you use? A meat cleaver or a scalpel?

Should You Cut Marketing Expense in a Recession?

Marketing costs are a prime target for the CFO’s slashing of expenses. The logic is: If fewer people are buying then why spend more marketing dollars to prospects who aren’t going to buy anyway? Makes sense!

But there is another way to look at marketing dollars. Even in the lowest point of a recession there are sales, albeit, at a lower level. Let’s assume that your company wants to hold sales flat good times or bad.

During the good times sales come relatively easy. There is plenty of demand and it doesn’t take much effort for the phone to ring. If you wanted to hold sales flat then you would reduce your marketing dollars in the good times. Right?

Conversely, when bad economic times are upon us it takes considerably more effort to generate the same sales volume. So if you increase your marketing efforts in a recession you should be able to hold your sales flat.

The problem with this argument is that most companies don’t have the free cash flow to fund increased expenses in a down market. So what is the solution?

I suggest that you take a scalpel versus a meat cleaver to your marketing expenses. Analyze the productivity of your marketing dollars. What marketing programs have produced the most results? Is it public relations? Direct mail? web site?

You should start tracking how your sales inquiries hear about you. We had one client who was spending $250,000 per year on yellow pages ads. We set up a program to track the source of each sale. The client discovered that less than 10% of their new sales cam from the ads. The majority of their new sales cam from the inside sales force. Consequently, we reduced the yellow page budget to $50,000 per year and hired two more inside salesmen.

So before you start slashing and burning your marketing budget go back to the tried and true marketing efforts that produce results.

When in a recession, your CEO needs extra advising or guidance to make it through. Furthermore, they need a trusted advisor or wingman. Learn how you can be the best wingman with our free How to be a Wingman guide!

Should You Cut Marketing Expense in a Recession?

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Should You Cut Marketing Expense in a Recession?

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