You’re making lots of sales and you’re really busy but there doesn’t seem to be much profit or cash left at the end of the month. This is such a frustrating problem because you’re doing so much hard work yet reaping no rewards for it.
You can probably relate to the story below…
A client we worked with recently had annual sales of over $15million but weren’t making any profit! So they were doing all the hard work – bringing in sales, purchasing and warehousing product, all the administration behind running their business day to day…with absolutely nothing to show for it. In fact they were making losses.
Until we got together, their solution was to work harder and harder trying to drag in more unprofitable sales. They were demanding more from their sales team but didn’t know what to change to get better performance.
Together, one of the strategies we implemented was what we call an 80:20 analysis on their business. It was a real lightbulb moment. You see, they had 667 account customers in total. Of these, 39 customers accounted for 33% of their turnover and GP dollars. That’s right just 39 out of 667 (or 5.7%) of their customers were 33% of their business.
Another interesting finding was that many of their smaller clients were actually on better pricing than some of their best customers. You see these smaller customers on the surface were price sensitive and managed to haggle their sales reps down to rock bottom prices.
Once we uncovered these facts the solution was simple. Simple but not easy. We changed their pricing structure, started rewarding higher volume clients with the correct pricing while raising prices to the raft of smaller accounts that only buy in small volumes. (By the way, at the time of writing they’d had only 2 complaints from the 354 clients who’s prices were raised). We’ve also put strategies in place to lavish their top 2 tiers of clients with service, leading to increased referrals and repeat business.
These changes add $365k in profit to the bottom line for this client this year. BUT that’s only the beginning. We’ve also helped them find another $650k in profits through other strategies just as simple as this one.
How much money are YOU leaving on the table??
Until you don’t understand these key measurements in your business and what to do about them, you’ll continue to be frustrated!