Small Mistakes Can Have a Big Impact
One of my favorite sayings by Yogi Berra is, “You can see a lot just by looking.”
No doubt, we are all so busy that we forget to take the time to just “look” at our business. Business owners often do or fail to do simple things that can have significant impact on their bottom line.
I like to encourage business owners to take the time to assess their activities and make sure they are not making some of the common mistakes that can mean the difference between a positive and negative bottom line.
Here are five common sales/revenue related mistakes that I see on a regular basis:
Setting the wrong goals for sales performance
It is common practice to set sales goals for your sales team. However, make sure you are setting the right sales goals! Remember, if your sales staff has the authority to negotiate the price or discounts to customers then you should be setting gross profit margin goals. This keeps the focus on profitability instead of just sales volume.
Using standard pricing formula on all products/services
Many business owners, especially retailers, use a standard mark-up on their merchandise. No matter what the product or the perceived value to their customer, they just keystone (or double) the price they paid for the product.
This is not necessarily a bad thing. However, I encourage business owners not to just blindly depend on a standard mark-up. The market may bear a much higher price on an item or may have a market value much lower due to competitive market awareness.
I call this the “art of merchandising” when you have the ability to maximize the profit margins on your products based on understanding how your customer values your products or services.
Failure to raise prices
In the past three years, many business owners have been terrified of raising their prices. I can understand their concern but if your costs keep going up then at some point you have to pass this cost on to your customers or go out of business. It is truly that simple.
Focusing on the wrong customers
Not all customers are created equally. Business owners need to know who their profitable customers are and allocate resources appropriately. As a matter of fact, you may need to “fire” customers who take a great deal of your time and add little or nothing to your pocketbook.
If you can’t say no to customers, then you should raise the price of the services or products offered to them. It will either make them more profitable or they will “fire” themselves. This will free up your resources to better serve your “productive” customers.
Failure to utilize market segmentation
Not all customers want your product or service delivered the same way. With communications between customers and businesses becoming more and more customer centric, it is important to think of “value” added services that can help you deliver what the customer wants.
Some things that you might change to help you reach different market segments are: product size, the combination of products or services offered, the way the product is delivered, the time it is delivered and / or the product packaging.
These changes may help you take your product to a whole new audience.
So when you look at your company’s revenue, ask yourself if you are leaving money on the table by making any of these five common mistakes. It’s so easy to get caught up with the demands of the business to overlook simple things that can help increase profits.