I wrote the following blog in 2018. I think it is great for a re-visit. For those who have not read it, please enjoy…
You Cannot Increase Sales
Yes, that is true, you cannot increase sales. Go ahead, try it. You cannot increase sales or profit (or lose weight for that matter), in and of themselves.
Why? Because those 3 things – (1) sales, (2) profit, and (3) weight loss are all results. They are things you can measure, but not manage.
What you can do is manage your activities. You can manage (and measure) the activities that make up those 3 things.
For example, you can make sales calls. That’s an activity you can both measure and manage.
You can reduce expenses by renegotiating terms with suppliers. That will likely have the effect of increasing profit, all other things being equal.
You can eat less, and exercise more, that will likely have the effect of you losing weight.
I am driving this point home because the only controllable things in life are activities. We cannot pre-determine what the results of those activities will be…we can only measure those results.
The reason I am pounding this point home, is because businesspeople and salespeople often say, “I am going to increase sales”. Great intention, of course, yet that is not a controllable activity.
It is particularly challenging with sales because sales are made up of 3 things, not 1 thing.
The 3 Things That Make Up Sales
What are sales made up of? Customers buying goods and services? Yes, of course. So, let’s look a bit deeper. What are the 3 things (and only 3) that make up sales.
It plays out as a formula, and it goes like this:
- Number of active customers
X
- Number of times they buy from you (in accounting terms that would be transaction frequency)
X
- The average amount they spend with you per visit (person or online)
=
TOTAL SALES REVENUE
So, why is this important?
The One Thing People Focus On
It is important because when people say, “I am going to increase sales”, they almost always mean they are focussed on getting new customers.
Of course, getting new customers is a perfectly legitimate way of growing your business, and we need to all focus on that as businesspeople.
However, as you can see in the above formula it is only one way to grow your business. There are two more (3 more, but this blog is just focussed on the 3 ways to increase sales).
And we all know that getting new customers is the single most expensive way to grow your business.
The Second Part That Even Huge Businesses Miss
The 2nd way to grow your sales is to focus in on increasing the number of times your customers/clients do business with you.
Now, you will begin to see that as a strategy it is completely different than way #1 – increasing the number of customers in your business.
And as a different strategy, it will lead to different activities, which – as your goal and intention – lead to different results – increasing sales.
So, what could you do in your business to encourage people to come back more often?
Here are a couple of ideas:
- A quarterly newsletter talking about new products and/or services
- A loyalty card
- Phone calls, reaching out to connect with existing clients
This is where brainstorming with your Team can really create a massive list of fun, creative ideas. Then, take your list and prioritize and take on the top 3 to implement.
And remember this – what gets measured gets done.
Let me give you a real-life example of the 3rd idea above – making more calls to your clients.
A client of a colleague of mine (a business coach) complained that his business was growing at a snail’s pace. My friend coached him to do this one thing – block every Friday morning off to call his clients.
And do what, you may be thinking? Well, it wasn’t just to connect and talk about the weather.
What this professional service provider did, was simply ask rocket-science level questions, like, “how are things going in your business?”, and “what are the issues you are dealing with now this quarter?”
Those simple questions led to them talking about their problems to this person.
This professional service provider acted wisely He did not jump in immediately with solutions. He kept drilling down with impact-type questions, as in, “what is the impact on your business of that problem you just shared with me?”
This often led to his clients asking for him to take on some of these issues. This led to more work for the professional service provider.
What were the results? They shocked him. Sales doubled, and soon he moved into a bigger home to retire to.
And his clients were happy, as the professional services firm became more involved and solving chronic problems for his clients.
That simple activity of blocking time to call his clients and ask simple questions led to more work for the company.
And here is the kicker – do you think those clients felt more cared for, or less? Do you think that increased or decreased loyalty?
And this was an activity the business did rather than focusing on getting new clients.
Lastly, what do you think the cost of those new sales were? Higher or lower than going after new clients? Only the cost of his time to make a call.
The 3rd Part That McDonald’s Has Mastered
The 3rd way to increase sales is to increase the average sales value of each transaction.
I think we can all see that this, again, like way #2 is a completely different strategy than way #1.
What are some ways you can increase your average sale?
- Bundling – putting together a package of goods and services hat solves a total problem for the client/customer
- Scripting – just asking for the sale! (I will talk more about that below…)
- Asking questions
- Newsletters
- Price increase
Again, as in number 2 above, you will want to brainstorm ideas here with your Team and come up with 3 to put into practice right away. Measure your results.
Let us take a closer look at 2 of the above ideas. One is scripting, the famous McDonald’s “would you like fries with your burger?” is an obvious example. McDonald’s measure everything and that script has measurably increased sales and profits dramatically.
Another way to increase sales is to affect a price increase. I can hear many of you reading this saying, no way, I cannot do that without losing customers!
I hear that all the time, when I suggest businesses increase their prices. It goes something like this: “I cannot do that, Mark, because I am in a competitive industry and if I do that I will lose too many customers and scare off new ones too!”
Just last week, I met with a client whose production manager convinced the owner (who was an initial “no” to a price increase) to increase prices by 5%.
They did. Do you want to know how many customers they lost?
Zero. That’s right, zero. They have loyal customers who love their product (organic food supplements), and a 5% price increase was too small to have them leave.
The result was a direct increase to sales that fell right to the bottom line as an equivalent increase to profits!
It costs you nothing to implement a price increase…
Creating a Profit Improvement Plan
Ok, so now it is time to put it all together.
If you concentrate your energies on all 3 areas of your sales – increasing new customers, increasing the number of times they do business with you, and increasing the amount they spend per visit, you will have an amazing compound effect on your sales.
Try it out. Print out and fill in the blanks of this Profit Improvement Chart and see the impact of a 5% change in these 3 ways to grow your sales has on your bottom line.
| ESTIMATE YOUR PROFIT IMPROVEMENT POTENTIAL | |||
| Company Name: | |||
| Year Ending: | |||
| Date Created: | |||
| Components of Profit | Present Position | Change Factor | Possible Position |
| Number of Active Customers | 5% | ||
| *multiply this by the average purchase frequency | 5% | ||
| Number of Sales Transactions | |||
| *multiply this by the average value of a sale | $ | 5% | $ |
| Total Sales Revenue | $ | $ | |
| *multiply this by the gross margin | % | % | |
| Total Gross Margin | $ | $ | |
| *subtract the fixed overhead from this | $ | $ | |
| Net Profit | A $ | B S | |
| Profit Improvement Potential | B-A | $ | |
You will be amazed…. thanks for reading!