Trump Cards for Profitability By Mary Cantando

Whether your revenue is increasing, decreasing or holding constant, shrinking profit margins have the potential to drive you under.
There are two ways that sales can pull down profitability: Your products or services can be priced too low or your cost of sales can be too high. When your price is too low, it holds revenue down; when your sales cost is too high, it pushes costs up; either way the thing that gets squeezed is your profit. Both of these problems are relatively simple to fix; however, most entrepreneurs are so busy they don’t take the time to identify and resolve them.
First, let’s consider the low price problem. Although it reeks of common sense, I’m going to say it anyway: “Not all sales are good.” Closing sales for the sake of closing sales is a recipe for disaster. Good sales revenue is sustainable and profitable, rather than feverish spurts of sales at “whatever” profit.
If you’re like many entrepreneurs, you’ll say, “My current pricing is what the market will bear.” Well, maybe you’re looking at the wrong market.
Most of us want to grow and think the best way to do this is to “sell more of the same.” But this is often the wrong approach, and you need to consider ways to create revenue growth that are more profitable. Approaches that have worked for my clients include:
1.     Marketing existing offerings differently
2.     Modifying existing offerings to create premium-priced offerings
3.     Developing new offerings at a higher price
4.     Growing revenue through geographic expansion

Regardless of the method, selecting the right approach for your business and then executing it consistently can propel you to greater profitability in a short period of time.
Besides increasing margins, you can enhance profitability by lowering your cost of sales. Do this is by analyzing and improving every element of your sales process. You may hate details, but consider what a 5-10% increase in profitability is worth to you. You can complete this task in five phases, each phase lasting about a month.
Here’s what the process looks like:

1.     Break down every component of your sales process and document: Who does what? How? When?  Where are the bottlenecks?
2.     Determine the cost of every component. Calculate costs for: leads, referrals, appointments, proposals and closed sales.
3.     Determine the gross profit of each sale and compare that with the cost of the sale. Include costs for: marketing, advertising, sales staff, sales commissions and bonuses, and overhead.
4.     Determine which activities you can streamline, eliminate or delegate. How do your top performers do these tasks compared to others? What do they do that others don’t? What do they delegate, or wish they could delegate?
5.     Implement these changes.  Document your new process. Rework your comp plan to reward profitable sales. Show your team how the new process will make them money.

Revamping your sales process can provide multiple boosts to profitability. It can increase the quality and quantity of your leads, shorten your sales cycle, create more selling time for your sales staff, and eliminate unnecessary overhead.
Increasing your margins and lowering your sales costs can be the trump cards you need to win the profitability game. On one hand, you increase your pricing by positioning your offering to provide the greatest value to your customers. Then, you lower your sales costs by analyzing and revamping your sales process. When you play these two trump cards together, it’s easy to win.

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