How Is Your Bottom Line?
It’s not just about top-line sales, it’s about bottom-line profits
Increasing sales is often the main focus for any sales-driven business. But, don’t forget about margins, sales rep compensation formulas, overhead costs, vendor rebates, etc. Keep an eye on these factors to grow not only top-line sales, but also bottom-line profits. And often, if you look at your book of business strategically, lower sales can result in higher profits.
This is not a complicated industry and my profitability calculator is simple. You know how to make money in this industry, but if you are like most owners, you have a lot of balls to juggle and it’s easy to get caught up in the minutia of the day and fail to step back and think strategically about how to increase your profits without growing sales.
Three things you can focus on to grow profits:
Increase gross profit margins – this one is relatively easy as margins are typically just a state of mind so open your mind, try a couple of points more margin on that next quote and make more money.
Reduce your sales compensation – tough mentally but doable if done properly. This is not about reducing sales reps' income but rather helping them grow sales while making an adjustment to the commission split along the way so both parties make more money.
Reduce your fixed overhead costs – as your business has grown, you might have gotten fat, so go through your P&L line by line and see where you can trim costs. Can an investment in technology help you increase the productivity of your admin staff and decrease your average cost to produce an order?
BONUS topic – working with a smaller list of preferred vendors can add an extra point and a half to your bottom line. If your business is selling at least $2-$3 million of promotional products per year, you can get lots of vendor benefits. But you’ll need to join a group and there are several out there including Facilisgroup.
I often speak with distributor owners who tell me about their reset year. They stopped focusing on NBD and top-line sales growth and took stock of their business and made some adjustments. Almost always, the process includes firing some underperforming sales reps and some high-maintenance clients. The results are always the same and I can see the owner’s eyes light up as they proudly exclaim that sales went down but PROFITS WENT UP!
It happens every time, and is not a coincidence but rather a conscious effort to think strategically and make the hard decisions even if they seem counterintuitive at times. Want to speak with distributor owners who have experienced this? Knowledge sharing is a big part of being a Facilisgroup partner so email me and I’ll send you contact information for owners who are willing to chat and share their success stories about selling less and growing profits.