Pointers to increase sales performance

 

Focus on niche markets - there is an advantage in positioning your company as a market leader in a niche market.

Target a niche market that drives the greatest sales, profitability and quickest sales cycle.

This will produce sales growth with the least amount of effort. Niche market leaders generate strong sales revenue and profit growth driving up the value of their business.

Promote your products - drive increased sales growth by offering customers bespoke packages such as volume discounts, extended contracts or product bundles.

There is no merit to be gained from discount pricing on your offerings if they truly provide the value described.

Develop your brand - unique design, functionality and technology can make your products proprietary, which can increase the desirability of your products/services and the price a buyer is willing to pay. Branded products offer protection from the competition and enabling sales of products at a higher price and profitability.

Highlight your USP - even if your company are offering products that are not proprietary, it is vital that customers recognise what makes your company different to the herd.

When you do this successfully, your company becomes the first choice and achieving sales targets will not be an issue.

Jettison underperformers - the best way to dramatically lower your costs and improve profitability is to shed underperformers. Evaluate all of your products and services and delist them if they are not profitable or helping to drive sales of your other products.

Ensure that marketing is delivering a positive return on investment. Less easy is the evaluation of the sales team but in reality underperformers are a luxury no organisation can afford.

Everyman for himself

Faced with increased competition there is a growing trend from companies to press their suppliers into accepting lengthened payment terms.

Such terms can only be served by larger organisation with adequate cash reserves.

For the small to medium supplier it further ratchets up the pressure at a time when for the most part banks are unwilling to increase their credit lines.

For some time companies have sought to stretch the length of their payment terms by all manner of means both fair and foul.

As profit margins are further squeezed by increased operating costs the importance of maintaining cash flow is vital.

Business is hard-won in the current climate, but above all there has to be a commercial raison d’être for any transaction.

Mutual reciprocity has to be the basis on which the customer/supplier relationship is sustained.

One of the knock on effects of increased competition in the retail sector will be the erosion of profit margins and the further pressure on suppliers to absorb more of the pain.

 

Early warning systems

 

There are numerous tell-tale signs which point to the fact that a company may be heading into trouble.

 

The following is a basic check list which should help to determine whether the problems are of a temporary nature or have more serious implications for the future of the company:

 

The most important element in any business is maintaining a healthy cash flow. It is imperative that a strict control is maintained on all outstanding invoiced amounts.

 

The value of an efficient credit control system cannot be over emphasised.

 

Do not focus on generating sales with little margin in the belief that over time things will improve. Being the “cheapest supplier” will not provide an automatic route to more satisfactory profits in the long term. It is often better to keep your powder dry.

 

If you are constantly in danger of breaching your credit arrangements with the banks or suppliers this is a clear indication that the company is not trading satisfactorily.

 

As conditions deteriorate more and more time is spent focussing on the problems and not enough on to how to position the business for the future.

 

Particularly for owners of SME’s it is not easy to take the necessary remedial actions and very often this is where an outsider can be of assistance in repositioning the business before it is too late.

 

Effective management principles

In order to achieve success all organisations must have effective leadership. It is the responsibility of management to lay down a set of ideas and objectives that are articulated, understood and supported by the workforce .Good people do not like working for organisations whose values are muddled.

 

Managers have to take difficult and unpleasant decisions. These often need to be made swiftly balanced against conflicting demands. It is not always possible to access cast-iron evidence to support the decision making process. This is one of the tests of strong management.

 

A clear and defined vision are essential requirements. Managing a large company, and dealing swiftly with a variety of challenges and issues is a complex task.

 

The desire to succeed which provides the drive and focus on excellence is one of the hallmarks of a good manager.

 

The workforce is the company’s most precious asset. Accordingly the ability to judge people and value their contribution is an essential prerequisite for any manager.

 

To build a talented team requires working with people who may be better at their job than you are at yours, and to guide and motivate them. People learn far more about the art of leadership from a good mentor than from any course or training exercise.

 

The ability to respond quickly will prove invaluable when things go wrong. Surviving a reverse and changing direction is the utmost test of resilience and flexibility.

 

 

Cheap food, somebody’s footing the bill

 

In a market where prices are squeezed to the absolute and in order to protect margins suspect practices and questionable ethics will inevitably come to the fore.

 

The current economic reality will continue to underpin the demand for cheap food but in satisfying this demand there is a price to pay.

 

The combined effect of the recession, the growth in online retailing and the increased market share of discounters such as LIDL and ALDI has shaken the likes of Tesco, Sainsbury and Morrison’s. For supermarkets focussing on market share food prices must be kept down, at all costs. But in the case of farming it is such a long cycle and there is little account taken of retrospective costs for the producer.

 

Looking back 25 years ago, British people probably spent about 22% of their disposable income on food.

 

In 2014 the spend is roughly between 4 and 8%, so food has actually become cheaper.

 

The reality is that the 'bog-offs' - the buy-one-get-one-free deals are not actually sponsored by supermarkets. They are paid for by the producer who has to agree to them under tight terms and conditions.

 

As the margins of the big supermarkets fall from 5% to nearer 3% producers will be expected to absorb more of the pain.

 

This year there have been 146 food producers entering insolvency with the finger of blame pointed at the highly aggressive buying patterns of the supermarket chains.

 

Efficient stock turnaround

 

Stock turnover ratio equals cost of goods sold during a specific time frame, divided by the average stock holding during the period.

 

The result of this ratio gives the "number of days that on average money is tied up in stocks". The longer this is, obviously the worse this is for the business as the money is not available to be used elsewhere.

 

An stock turnover ratio of 20 means that the average amount of stock holding during the year has been renewed, or turned over, 20 times over the course of the year.

 

Dividing the number of days in the period under consideration by the turnover ratio tells you how many days it takes, on average, for the warehouse to empty and then be refilled. The number of days in a year, 365, divided by 20 is 18.25. So the entire stock is fully sold and replenished every 18.5 days, on average.

 

As a general rule, the higher the stock turnover ratio, the more efficient and profitable the firm. A high ratio means that the firm is holding a low level of average inventory in relation to sales.

 

Carrying stock ties up money. This money is either borrowed and carries an interest charge, or represents funds that could otherwise be better used in servicing other elements of the business.

 

There are additional costs in holding stocks such as storage and the risk of getting spoiled, breaking, being stolen, or simply going out of style.

 

Wherever possible companies need to reduce stock holdings and there are various means by which to achieve this aim:

 

Liquidate slow-moving or obsolete stocks.

 

Introduce more efficient production techniques to reduce stock holdings.

 

Rationalise the product range weeding out the under performers and thereby reduce stock carried.

 

Negotiate sale or return with suppliers in order to avoid being stuck with unwanted product.

The inherent dangers of diversification

Without doubt one of the most difficult challenges a business faces is diversification.

Very often a company is faced with the dilemma of diminishing revenue returns and a tired business model which is either irrelevant or obsolete

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Diversification is seen as the solution to this dilemma. However, the mechanism for achieving this objective can be particularly difficult.

The first step is examining why the current business model is not working.

This requires an honest appraisal from management in respect of their performance.

Then the areas of diversification have to be closely considered, often people plunge into businesses in which they have little knowledge or experience and the results pretty quickly show up these deficiencies.

Thirdly one should always respect geography it may be very tempting to consider that there are opportunities just waiting to be picked up but to underestimate the advantage of local knowledge and conditions can again prove costly.

In essence diversification can provide the answer to a company’s need for increased revenue but without a clearly defined strategy it can equally provide another drain on an already vulnerable balance sheet.