Author: Tom Aranow, Harrington Daniels Advisors
Let’s talk about a major business myth. It goes something like this: “All we need to do to get back on top is to increase our sales.” Just about every client we talk to says that or something like it in our first meeting. Just about every client who says that is wrong.
Sure, everybody who owns or runs a company wants great sales numbers, and it’s true that sometimes increasing sales is all an ailing company needs to regain its health and vitality, but more often, more sales is not the cure-all to fix problems that threaten a company’s long-term viability.
Consider, as an analogy, a car that is so out of tune that it guzzles gas like crazy. Is the answer a bigger fuel budget? Does the person who owns that car need an infusion of cash to cover both the outlandish use and the outrageous cost of fuel, or does he or she need to take the car in for a tune-up?
It’s probably understandable that so many business managers focus on the top line. To do so means that everyone focuses on the product and the sales effort and not on the management weaknesses that may have led to the inefficiencies that undermined both productivity and sales. The problem and the solutions are out there in the marketplace or the economy and not in here in a deterioration in quality or the way the company manages costs.
Temporary fix
Many owners and managers fail to realize that if the company is broken or out of tune, finding new sales will at best be a temporary fix. The new money will cover a host of sins for only so long. Then the systemic weaknesses in the company’s performance will catch up to the new sales volume and the company managers will meet again to talk about firing up the old sales and marketing machine. They may also consider changing the sales and marketing department managers, who had little or nothing to do with the inherently weak profit margins that created the cash-flow problems in the first place.
The argument for tuning up the inefficient engine or even buying a different model shouldn’t be too hard to follow. Every dollar you don’t spend on gas is a dollar in your pocket.
In your company, the dollar you don’t spend goes right to the bottom line also. The entire value of the dollar is available for your company’s use. In contrast, the dollar that comes in from sales has all of the costs of making and delivering your goods taken out of it. It may really be worth only 40 or 50 cents or less in your challenge to pay all your other bills. Which dollar would you really like to have more of?
Still, this week and next, we will meet with distraught business owners and managers. They will tell us they need our help, and they will tell us “We just need more sales.”
Tom Aranow has over 30 years of executive management and entrepreneurial experience in a variety of industries and is the author of over 35 published articles and essays on best practices in business and not for profit management. He is the Senior Advisor for Business Strategies at Harrington Daniels Advisors, in Grafton, and Kohls Group Consulting in Pewaukee, he can be reached at 262-376-9507 or by email at tom@hdadvisors.com
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