By Ruth Badger, Business Sense

Don’t be a ‘busy fool’

One of my bugbears when I come to meet businesses at the moment is that too many business owners don’t know their sales inside out. Too many are working away, making sales, but not really looking at the returns they’re making — the phrase I use to describe these people is that they’re ‘busy fools’.

For example, a holiday firm that have managed to increase the occupancy in their properties, but has done so by decreasing their costs and therefore revenue, is a busy fool. When I go into a company like that, they often complain ‘our bookings are up on last year, why are we still struggling?’ and they haven’t taken into account the fact that they have discounted their offering so much that they haven’t gained anything from having the extra occupancy.

Do your sums

If you don’t have tight control of your figures, you can easily find that a business is actually selling more of something for less overall than it did previously. It may sound simple, but it’s amazing how many businesses fall into this trap. You need to review your sales figures constantly and look at the trends to tell you where your most profitable areas are.

I help a technology firm that sells various products and we started carefully monitoring every single sale that comes in so that they can see where the most profitable deals are so that they can plough their money back into these areas. Since we’ve been doing that, we have realised that their solutions-based products are massively more profitable than the hardware they sell. We’ve now put a strategy in place that is all about generating more solutions-based sales leads so that they can capitalise on the great profit margins there. This business now knows what it has to do next year and has a clear growth area to target.

Look at your own business for answers

I tell every company I work with, and would say to any business reading this, in order to understand your business properly, you need to understand what type of sales leads you need, what sort of conversion rate you get from those leads, the average profit per sale and how long it actually takes to get that money in. If you understand and know all of those things, it will give you a complete sales strategy. It’s amazing how few companies know detailed answers to all of those things.

The other thing I would say is that I left school with an E in maths, so it’s not something that requires an economics degree to get right. All of these figures are there in your business, you just have to record them and then monitor them. By doing that you will get answers — not always the ones you might be expecting. You will see where you are really making your money and which areas of your business are not really profitable.

Business Consultant Ruth Badger writes a regular column for Business Sense.

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