GUT CHECK!
Making enough income is the first step to profitability. If you aren’t selling enough this month, will you next month? Do you know? Be sure to have an accurate and up-to-date
budget so that you can see where your income needs to be each month, and that for the year overall you estimate to end on a positive note.
Let’s get a quick read on how severe this issue is…
Compare numbers by individual product if you can. If sales this year are down 5% or less, consider that about even.
If your sales are down more than 10%, be concerned! Pinpoint the cause (or causes) and ask yourself hard questions about the product you offer.
Be sure that you have detailed answers to:
- Who are your customers? Are they buying like they used to? Why or why not?
- What efforts are you making to gain new customers?
- Do you have the right product mix to satisfy your customers?
- Which products are the most profitable? Which are the least?
If you are not sure, and your revenue is neutral or down about 5%, you’ve done well these past few years. You should continue to refine your marketing plans but keep on the same path.
However, if you are not sure, and your revenues are down 15% since last year, you should take the time to look at the past two or three years. If you can not pinpoint HOW the economy has affected you – and if your answer to declining revenue is always “It’s the economy” STOP. You can only blame the current economy so much. Consider significant changes to your operations – revisit your marketing strategy and the need for your product in today’s environment.
In summary, ask yourself:
- What would it take to sell more?
- Can I charge more for the product?
- Are my discounts affordable?
- Which of my products have the best gross profit, the best net profit? Which have the least?
After answering these questions in detail you should have a roadmap to increase your revenue.
How do your sales compare to last year?
Return to the Profitability module